Facebook's crypto-currency is about to crash

Diem, a crypto-currency initiative formerly known as Libra backed by Facebook owner Meta, is considering selling its assets as a way to return capital to its member investors.

Diem is in talks with investment bankers about selling its intellectual property. And you want to find a new home for the engineers who developed the technology. You also want to recoup any remaining value in your Diem parts project.

And when, in 2019, Facebook first unveiled the idea for its digital stablecoin that aims to revolutionize global financial services, it did so in collaboration with dozens of other companies.

But the union wasn't enough to protect the project from global regulatory scrutiny. After Zuckerberg was called to testify, some of the partners abandoned the project and changed its name to Diem.

Diem's ambitions faded and its founder, David Marcus, left Meta last year. The partnership struck a deal with Silvergate Capital to issue Diem. But resistance from the Federal Reserve dealt a fatal blow to those efforts.

The Diem association pronounced in May that a subsidiary of Silvergate Capital was to be the issuer of the Diem USD stablecoin, a type of U.S. dollar-indexed crypto-currency typically used to buy and sell other crypto-currencies.

After a long period of wrangling between Diem advocates and regulators, Fed officials told Silvergate Capital that the agency was not comfortable with the plan. It could not reassure the company that it would allow the business.

Without a green light from the Fed, Silvergate Capital is unable to issue the new asset with the confidence that the Fed will not take drastic action.
The crypto-currency championed by Facebook's founder is falling apart

It's unclear how a potential buyer would value Diem's intellectual property or the engineers who helped develop it.

Meta owns about a third of the project and the rest is owned by the association's members. Members of the association, which includes venture capital firms and technology companies, agreed to invest and pay to join when the association was formed. It's not clear which companies, in addition to Meta, have invested in the initiative.

Diem explains that its partners include venture capitalists. In addition to Singaporean public investor Temasek Holdings Pte.

The president's task force on financial markets said in a November report that stablecoin issuers should be subject to regulation if the tokens are used as a way to buy and sell things.

The group of regulators said it feared what might happen if a large network of users of a technology company suddenly began dealing with a new currency, and that the combination of a stablecoin source with a large company could lead to an excessive concentration of economic power.