The embattled project has faced widespread opposition from regulators, central bankers and governments.
The Facebook-founded Diem Association reportedly plans to launch a U.S. dollar-pegged stablecoin this year.
Citing an anonymous source, CNBC reported on April 20 that Diem will start with a small-scale pilot program focused largely on person-to-person transactions, although there may be an option to buy goods and services.
Formerly known as Libra, the stablecoin project faced huge opposition from central bankers and political leaders around the world when it was announced in June 2019.
Many feared that, with Facebook’s 2.8 billion customers instantly able to use Libra, it had the potential to undermine national currencies and even threaten economic stability — particularly in downturns — as well as making money laundering harder to fight.
The G7 and G20 last year threatened to delay Diem’s launch until global regulations governing stablecoins are in place, and the European Union has threatened to ban it altogether if the Diem Association doesn’t relocate from Switzerland to an EU country. And the U.S. sees it as a potential threat to the dollar’s position as the world’s reserve currency.
However, the project launched stablecoins — until then unknown outside of crypto — into the public eye, and helped spur governments’ growing interest in central bank-issued digital currencies. Until then, China was the only country seriously working on a digital currency. Now, nearly every major economy is investigating CBDCs, and the Bahamas has issued one.
An Ignominious Retreat
The Libra outcry led many of the project’s initial backers to pull out, notably the mainstream financial firms like Visa, Mastercard, PayPal, and payment processor Stripe.
And this past April, the project retreated from plans to launch a single global stablecoin backed by a basket of major currencies to a series of single-currency cryptocurrencies. It rebranded as Diem in December, and Facebook changed the name of its wallet to Novi at that time.
That said, the Diem Association has remained steadfast in its commitment to the project, and spent much of 2020 hiring an executive team with expertise in financial crime and regulation.
