lydio.rodrigues@gmail.com, Author at Crypto Jar

Reading time - 6 min. In December 2020, Facebook confirmed plans to release its own Diem cryptocurrency. This will happen in the first half of 2021. To achieve the goal, Facebookers have to overcome the last barrier: to get the approval of financial regulators. It must be admitted that this is not a trivial task.Let's try to figure out what Mark's cryptocurrency is, and why it is so disliked by regulatory authorities from the financial sector.What is Diem?For the first time, Facebook officially announced the development of Diem in 2019, but until December 2020, the cryptocurrency was called Libra. In the summer of 2019, the White Paper of the new stablecoin was presented to the general public. And in the fall of the same year, Facebook launched the Diem testnet.Initially, the technology giant planned to release a stable cryptocurrency, which would be backed by several national currencies at once - the US dollar, the Japanese yen, the euro and the British pound sterling. Subsequently, this concept was revised several times.The option of issuing several stablecoins at once was considered, each of which would be tied to a specific currency in a ratio of 1:1. However, now Facebook is already talking only about the peg to the dollar. Most likely, this decision will be the final version.Who helps in development?To develop the corporate project, Facebook immediately attracted large partners who were supposed to help finance the development of Diem. To coordinate efforts, a special structure was created - Diem Association (until December 2020 - Libra Association). Participants included leaders in the technology world such as Uber, PayPal, Visa, MasterCard, Coinbase, eBay, Andreessen Horowitz, Vodafone, and more.The concept of Diem provided that each member of the association makes a pledge of $10 million for the development of the project. For non-profit and scientific organizations, entry was free.Facebook staked out the right to select applicants for membership in the Diem Association. Women's World Banking, Kiva, Mercy Corps and others received the privilege of free entry. The maximum number of Association member organizations was limited to one hundred. As planned by the company, each participant received the right to 1 vote in resolving issues related to the development of the network. This would help avoid a situation where Diem could be controlled by one investor or a group of investors.Subsequently, several participating companies left the Association. These are Visa, eBay, MasterCard, PayPal, Vodafone, Booking and Strap. They explained their decision by the desire to focus on the development and development of their own products of a similar nature. Although it can be assumed with high probability that the main determining reason was the negative reaction of central banks and financial regulators in many countries.Why Facebook Cryptocurrency?According to the head of Facebook Financial, David Markus, Diem should help the company develop a single ecosystem for all its services: WhatsApp, Instagram, Messenger, etc. The cryptocurrency payment system will be integrated into all applications, online stores and services of partners in the Association.With the help of the Novi wallet, which until May 2020 was called Calibra, the multibillion-dollar audience of users of Diem Association member companies will be able to make purchases within the project infrastructure almost instantly, conduct various operations with cryptocurrency, securely store their passwords and be entitled to receive compensation in case of hacking account.In the future, we plan to add many paid features that will make using Diem even more convenient. To create an account, users will need to go through the verification procedure.However, some analysts say the real reason is not Facebook's desire to empower its audience. For example, the New York Times believes that the launch of Diem is a strategy aimed at monetizing even more users.David Martin - CEO of BlockForce Capital - agrees with the critics. He suggests that in this way, Mark Zuckerberg's company seeks to take a monopoly position in the mobile payment market.Forbes experts do not exclude that Diem will be able to displace the dollar as the main means of savings from the markets of developing countries. Economic crises can push people to buy a stablecoin from Facebook, because. it will be much easier to do this than buying dollars.How are Facebook coins different from other cryptocurrencies?Let's see how Diem differs from other cryptocurrencies. Is she better or worse? Or does it make no difference what to buy - bitcoin, Ripple, or is it Facebook's digital currency?Let's start with the advantages:Cryptocurrency from Facebook is a stablecoin that will be hard-pegged to the US dollar at a ratio of 1:1. This will avoid significant fluctuations in its value (compared to the same bitcoin).More than 3 billion people can become potential users of the new cryptocurrency — that is how many people use the services and services of Diem Association members today.Diem owners will be able to exchange stablecoins for dollars almost instantly in the Novi wallet, because this does not require intermediaries in the form of exchanges or exchangers.Thanks to solid financial support from the members of the Association, the development of the project and the development of new services will be carried out at a faster pace.Of course, it was not without drawbacks:Residents of China, Egypt or Cuba will not be able to pass verification. Cryptocurrency that has not yet been put into circulation is prohibited for citizens of some states that are under US sanctions.Users do not have the slightest influence on the development policy of the Diem network. Only members of the Association have the right to control it.Opposition from financial regulators is even stronger than American legislation, limiting the geography of the stablecoin. Diem is already preventively banned in some European countries.Why are the regulators against it?The negative attitude of the regulatory authorities is due to the fact that regulators cannot reliably assess the impact of the new cryptocurrency on the monetary policy of countries. They are concerned about the fact that using Diem will render their national currencies unclaimed or worthless.After the renaming of Libra to Diem, Olaf Scholz, the German finance minister, called the stablecoin “wolf in sheep's clothing". He believes that the issuance of a global currency should remain the prerogative of the state, and not a private company. And he connected the name change with an attempt to alleviate the fears of regulators about the permission to release Diem in Europe.In the US, many officials are not enthusiastic about the Facebook project. Senator Elizabeth Warren is confident that the Diem project will allow the company to become the most influential player in the US financial market. Zuckerberg even had to speak in the Senate in an attempt to dispel these fears. However, this brought little benefit.Soon, the FTC filed a lawsuit to force the separation of WhatsApp and Instagram from Facebook. Say, by controlling them, the company violates antitrust laws and does not allow competitors to develop. Although a few years ago, the same commission approved Facebook's acquisition of these companies.Will Diem appear in 2021?Now the only obstacle to launching a new payment system - at least formally - is waiting for the decision of FINMA (Swiss Financial Market Supervisory Authority). The preliminary deadline for its adoption is January 2021.In case of a positive result, Facebook will officially receive the status of a payment service from one of the most reputable regulatory organizations in the world. And this will allow us to hope for a softening of the positions of regulators in other countries regarding Diem.Let's hope that Mark Zuckerberg will once again surprise the world with an innovative product. Regardless of how you personally feel about Diem, the launch of this network will help to quickly introduce other cryptocurrencies into the economy. And there already everyone is free to choose the tool that seems to him more convenient and successful. 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