A former Facebook executive has shed light on how he says the company's stablecoin and blockchain project, which was originally called Libra before rebranding to Diem, ultimately came to an end, leading many of its staff to depart to other blockchain projects. The project was sold to Silvergate Bank in Jaunary 2022, which abandoned the project one year later, writing off its investment.
According to David Marcus, former head of the project and a former Coinbase board member, behind-the-scenes political machinations were the project's downfall, calling it "100% a political kill" in a lengthy post on X.
"There was no legal or regulatory angle left for the government or regulators to kill the project. It was 100% a political kill—one that was executed through intimidation of captive banking institutions," Marcus wrote.
According to Marcus, despite "...two years of nonstop work and changes to appease lawmakers and regulators," and the limited support of some of the Federal Reserve's Board of Governors, including its chair Jay Powell, the project's political prospects faced strong resistance from Treasury Secretary Janet Yellen, who warned Powell against allowing the project to continue in one of their biweekly meetings, fearing political backlash.
Yellen coming out against the project was its death knell, Marcus claims, writing, "...effectively this was the moment Libra was killed."
"Shortly thereafter, the Fed organized calls with all the participating banks, and the Fed’s general counsel read a prepared statement to each of them, saying: 'We can’t stop you from moving forward and launching, but we are not comfortable with you doing so,'" Marcus wrote. "And just like that, it was over."
Politico reported at the time that Facebook's business model, namely the prospect of the company also controlling a significant portion of the financial system, made regulators gravely concerned. "The combination of a stablecoin issuer or wallet provider and a commercial firm could lead to an excessive concentration of economic power,” U.S. regulators led by the President’s Working Group on Financial Markets said in a report on stablecoin regulation released in November 2021.
Many of the former Diem staff would leave to join Aptos and Sui, two Layer 1 blockchains based on Move, a programming originally developed by Facebook for its stablecoin project. Marcus, meanwhile, is currently helming his own crypto startup called Lightspark, which aims to expand the capabilities of Bitcoin's Lightning network.
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