Why Meta’s Foray into Cryptocurrency Hasn’t Taken Off
- on Aug 15, 2022
About two years ago, Meta, then called Facebook, announcement a project to develop Libra, a cryptocurrency for everyday consumer use, based on a basket of fiat currencies from around the world. Facebook created a separate organization called the Libra Association to support this project, in part to steer the project away from the negativity surrounding the Facebook brand. Soon after, the announcement had already garnered support from many major players such as PayPal, Visa, Mastercard, eBay, Stripe, etc.
The problems started soon after. The project has come under intense scrutiny from regulators around the world. Many of these major partners pulled out just months after the announcement. These partners were intended to be the validators of the Libra blockchain, whose participation was allowed with extremely high barriers to entry, so that only companies could become validators.
From Facebook to Meta, from Libra to Diem
When Facebook became Meta, the Libra Association was also renamed Diem Association, which focused on building a USD-pegged stablecoin called Diem. The company did this for two reasons. First, to (still) distance itself from the negative public image associated with the Facebook and Libra names, which is one of the reasons the company rebranded itself as Meta in the first place. Second, as a USD-pegged stablecoin, Diem is likely to face less regulatory scrutiny than Libra.
Built on top of a strictly permissioned blockchain, accessible via a mandatory KYC application, and designed as a USD stablecoin directly backed by fiat currency, Diem is far removed from the decentralized qualities of other famous cryptocurrencies like Bitcoin or Ether. At this point, it is just corporate-issued currency – a tough argument for central banks.
Struggles with meta and cryptocurrency
Following this total shift in strategy, the team behind Diem wanted to partner with Silvergate bank to help implement the cryptocurrency. The US Federal Reserve blocked the effort, later clarify that stablecoins should be regulated as banks if consumer buying and selling is to take place with them. They also pointed out that a large company with a large user base, such as Meta, cannot also be a currency issuer as this effectively breeds competition with the Federal Reserve itself. According to multiple sources, the Diem association is now trying to sell its assets, a strong sign that the project is coming to an end. Key members of the team, such as David Marcus, the Association’s founder, have already left.
At the end of 2021, more than two years after the announcement, Meta also began rolling out novi, formerly known as Calibra, a digital cryptocurrency wallet for use only in the United States and Guatemala. Despite the slow rollout and partnership with Coinbase, Novi still only supports the Paxos stablecoin and not Meta’s own Diem coin.
Rebranding didn’t help. While the goal of distancing herself from negative public sentiment made sense, moving from Libra to Diem, Calibra to Novi, this association to this association, and Facebook to Meta only made her story difficult to follow and concedes a weakening of their overall brand.
Meta is out of her alley here. Others are far ahead, both technologically and financially. While nothing is stopping others from acquiring the Diem Association or reinvigorating the project, the heavy flow of newcomers to the crypto world, along with the rapidly growing proficiency of existing players like Coinbase, OpenSea or Chainalysis, will likely prevent further progress on Meta’s crypto ambitions.
That’s not to say it wasn’t worth exploring the space – diving into new industries with small nimble experiments always has a good outcome, whether capturing a new market or learning valuable lessons.
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