If you think Bitcoin had a controversial entry into the cryptocurrency scene, think Libra. Diem, previously Libra, hasn’t even entered the market, and it is already getting unpopular nicknames like Global coin and Facebook Coin.
Names stick, and Diem is already in a sticky mess. This permission-based blockchain deservedly suffers an identity crisis because it packages centralized financial services as decentralized exchanges.
Initially, Libra was a blockchain-based payment system conceptualized for anonymity and decentralization. However, lawmakers in various developed nations like the UK, France, and the United States spoke against it. Some did so immediately after Facebook unveiled the Libra whitepaper.
Libra’s release was meant for 2020, but an aggressive push back from regulators in 2019 obscured the plans. Different entities fielded varying concerns addressing the Libra whitepaper, and the pressure pushed Facebook and its partners into drastic actions. Some partners left, leaving Libra with a looming identity crisis.
In this article, we discuss the rise and fall of the Libra Association. We are also looking into what Diem has to offer and how it’s evolved since conception. Stick around to learn the original Libra concept and why it rebranded to Diem to reduce Facebook stigma.
The Original Libra Concept
Facebook initiated and championed the formation of the Libra Association, and it always had a crypto tech in the works. The plan was to launch a stablecoin, which would be backed by a basket of national fiat currencies and securities.
The Libra stablecoin was designed to be more stable than any national currency, and Facebook would integrate it within its extensive social media coverage. Therefore, the cryptocurrency would be stabler than Bitcoin and enjoy undisputed, global utility. However, the grand scheme fell under siege the same day it was unveiled.
The Libra Association was to create new currency units on demand and retire units redeemed for fiat currency. It was also planning to reserve transactional data on the ledger for Libra Association members only.
Therefore, the blockchain technology wouldn’t be pure but a hybrid, centralized blockchain. The Libra Association reserved the distributed ledger’s reconciliation only to its service partners to prevent random data analysts from scrutinizing transactions.
Basically, Libra proposed a system where traditional blockchain transparency was obscured and reserved for its partners only. The pretext for shrouding the transparency was protecting customers’ privacy, but Mark Zuckerberg unsuccessfully tried convincing the Senate that Libra would honor users’ privacy.
Libra Couldn’t Address Trust and Privacy Issues
The Libra Association failed because of trying to appease both legislators and crypto purists. Revolutionary bitcoin users prefer permissionless cryptocurrencies, which transfer value in a decentralized fashion. Decentralized currencies can bypass regulatory enforcement.
Since Libra was not decentralized, it was to rely on trust, qualifying it as a ‘de facto central bank.’ The Libra Association and its network would be run by powerful corporations working in collaboration, and sovereign governments were concerned the Libra currency would cause widespread economic instability.
Unlike Libra, Bitcoin is apolitical, and it doesn’t need the backing of fiat currency. Bitcoin is designed to withstand the regulatory scrutiny that seems to be putting down Libra, and the pure blockchain network is trusted worldwide for its anonymity.
Remember, nobody really knows who created Bitcoin.
Libra is not censorship-resistant, and Facebook is infamous for infringing on users’ privacy. This social media platform was subject to Senate and Judiciary inquiries, and it was scandalized for abusing the privacy rights of billions of users.
International Regulatory Resistance: Why Are Governments Fighting Libra?
The French Finance Minister was the first to raise concerns over Libra, just minutes after the whitepaper became public. France strongly opposed Libra becoming a sovereign currency, and the ministry cited privacy issues and consumer protectionism.
The English central Bank was a bit more accommodating, but it called for regulation of the proposed permission-based cryptocurrency. German lawmakers took a more cautious approach, distrusting the motives of the currency.
The European Union didn’t want Libra outcompeting European currencies, mainly because Facebook has a firm marketing grip globally.
American politicians were also quick to thwart efforts of rolling out the proposed Libra Network. The United States House Committee on Financial Services directed Facebook and its partners to stop developing Libra.
The Federal Reserve, the President, Congress, and the Senate had severe concerns regarding money laundering, economic stability, national security, and privacy & consumer protection.
In response to the sharp criticisms and widespread distrust, Facebook promised to halt Libra until regulators felt comfortable. C.E.O Zuckerberg also promised Libra wouldn’t bypass US regulators by launching in other nations.
Facebook’s lousy rapport with regulators over privacy and consumer protection took a toll on Libra. US regulators petitioned Libra partners to explain how the currency would safeguard national security, and the following partners consequently abandoned Libra:
- Mercado Pago
- Booking Holdings
Libra received overwhelming lousy press, and it acquired negative connotations such as:
- Facebook coin: Libra partners were afraid they’d be considered complacent in privacy violations.
- Global coin: Governments were afraid Libra would overtake national currencies with FB’s robust marketing capacity, undermining national security.
Libra Rebranding to Diem: the Fundamental Changes
Facebook had to address structural and branding issues with Libra. The designers of this digital currency made critical changes to attract regulatory approval. The most fundamental of all changes was liberating the cryptocurrency from Facebook.
Facebook and the Libra Association announced Libra would rebrand to Diem, and the currency would not compete with fiat currencies. Instead, Diem would only complement the dollar, and it would also abandon the strategy of stabilizing behind a basket of various national currencies.
Facebook first renamed its blockchain subsidiary to Novi from Calibra. Novi is Greek for ‘new way.’
Diem was also meant to give this digital currency the connotation of transparency. Diem is Greek for the word ‘day,’ and the network promises the transparency of daylight. If only it can earn the trust of governments and safeguard the privacy of users.
Apart from repairing brand image, the Libra Association had to rebrand because of trademark disputes with other international firms. Finco sued the Libra Association in a New York court for using its registered logo trademark, and the company claimed monetary damages from the Libra Association.
Four European companies also petitioned against the Libra trademark, arguing Libra was a current form of their verbal brands.
This hybrid cryptocurrency is controversial because of its hybrid nature, but mainly due to Facebook’s robust marketing reach. Diem will likely revolutionize crypto assets significantly because of its permission-based blockchain. That’s why you should understand this proposed fintech.
Diem will only be backed by the dollar. It will offer widespread adoption of cryptocurrencies. This currency will combine the transparency and security of blockchains, and users can make secure global transactions.
This proposed digital has significant potential, and you should share your thoughts in the comments section. Do you have any concerns that the Diem Association needs to address? Let’s discuss.