Former Diem co-founder says Meta’s stablecoin project was a ‘political kill’

Meta’s former stablecoin project, Diem, which initially launched as Libra in 2019, ended after facing significant political and regulatory obstacles in the US, according to Diem’s co-founder, David Marcus.

Marcus made the revelations in a recent social media post, where he described the challenges leading to the project’s termination as heavily influenced by political considerations.

Regulatory and political pushback

Libra was initially envisioned as a global payment network supported by a basket of international currencies. The project garnered early support from major financial firms like Visa, MasterCard, and PayPal.

However, its announcement triggered scrutiny from US lawmakers and regulators, who raised concerns about its potential impact on monetary sovereignty, financial stability, and Meta’s broader influence in the global financial system.

Shortly after its introduction, Meta executives, including Marcus, testified before Congress to address concerns about the project. Lawmakers pointed to risks to sovereign currencies and cited Meta’s history of privacy controversies as additional challenges to public trust. These concerns led to the withdrawal of key early supporters and prompted Meta to rebrand the project as Diem in 2020.

Despite rebranding and efforts to scale back its ambitions, including shifting focus to a US dollar-backed stablecoin and relocating operations to the US, regulatory challenges persisted. Marcus revealed that while early discussions with Federal Reserve officials suggested the potential for limited approval, subsequent political conditions made progress difficult.

According to Marcus:

“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.”

Attempts to pivot and conclusion

The Diem Association partnered with Silvergate Capital to launch a dollar-denominated stablecoin. However, in late 2021, a letter from US Senators urged Meta to halt its Novi digital wallet pilot program, citing unresolved concerns about regulation and consumer protection.

In January 2022, the Diem Association announced the sale of its assets to Silvergate, marking the end of the project. Stuart Levey, then CEO of Diem, attributed the decision to the inability to overcome regulatory challenges despite significant efforts to address compliance and security risks.

Following the closure of Diem, many team members transitioned to other blockchain initiatives, including Aptos and Sui. Marcus has since focused on Lightspark, a company exploring the use of Bitcoin’s Lightning Network for payments.

Reflecting on Diem’s journey, Marcus emphasized the importance of neutrality and decentralization in building future blockchain projects. The firm’s history illustrates the interplay between innovation, policy, and regulation in the crypto industry.

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