WASHINGTON – A Facebook The digital currency project, backed by Inc., is being renewed in an attempt to address US officials’ concerns that it could be used for money laundering and other illegal purposes.
The project, originally known as Libra and renamed Diem last year, moved to the United States after withdrawing its candidacy to secure regulatory imprints in Switzerland, its supporters said.
The Diem Association has also announced a partnership with Silvergate Capital Corp. a La Jolla, California, Bank. The lender, which has been serving cryptocurrency companies as a major part of its business for several years, will issue dollar-denominated stable coins, Diem said. Stablecoin prices are often tied in a one-to-one ratio to a stable asset, such as the US dollar, to avoid the volatility of other cryptocurrencies.
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Among other changes, the association said its subsidiary, Diem Networks, would perform all operations for the planned payment network, as well as the digital stablecoin. He added that Diem Networks plans to join the Finance Ministry̵
Diem says the blockchain-based payment network will be faster and cheaper than existing payment and transfer systems, while protecting consumers and providing safeguards against financial crime.
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The moves represent the latest effort to address regulatory concerns about potential misuse of cryptocurrencies.
“This is the realization that the effort will require a presence that is acceptable to US regulators,” said Richard Levin, chairman of financial technology and regulatory practice at Nelson Mullins.
Diem CEO Stuart Levy, who joined the board last year, is a former US Deputy Secretary of the Treasury and has spent eight years as a general counsel at HSBC Holdings PLC. He played a central role in drafting the George W. Bush administration’s sanctions against Iran as the first undersecretary of the Treasury Department for Terrorism and Financial Intelligence.
As first conceived by Facebook and partners two years ago, the cryptocurrency will allow digital wallet holders to send and receive tokens backed by a currency basket. Facebook will create its own wallet that can be used for equal payments and shopping on its platforms, although the platform will be open to other wallets.
The first version of the proposal was well received by regulators around the world. Major partners in the payment industry, including Visa Inc. and MasterCard Inc., dropped out. The big banks that Facebook contacted refused to enter.
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Legislators who are already uncomfortable with how Facebook handles privacy around users’ photos and posts, outlined the feature to allow him to handle consumers’ money. The Treasury said at the time that it was worried that Libra can be abused by money launderers and terrorist financiers.
The former president of Switzerland said in late 2019 that plans to support Libra with a basket of currencies were unacceptable and that the project, “in this form, had failed.”
Libra’s launch has been moved backwards and its structure redesigned to look more like a traditional payment platform. Although the association plans to seek approval from Swiss regulators, Diem said on Wednesday that he was refusing the effort.
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A Facebook subsidiary, Novi, is among the 26 members of the Diem association, which also includes a welcoming company. Uber technology Inc. and an e-commerce company Shopify Inc. No member has a controlling stake.
It was not clear when the initial payment network pilot project would start. Officials familiar with the project said they were in close consultation with US regulators but did not expect any licenses or other approvals.