Despite strenuous efforts to win over banking regulators, Facebook’s ambitious digital currency payment project Diem is yet to get off the ground and might suffer from the brewing anti-crypto sentiment among key U.S. policymakers.
Diem is having trouble smoothing out regulatory issues with senior policymakers in the Biden administration, according to The Washington Post on Friday.
The digital money project has yet to get off the ground, despite Facebook’s tremendous political strength in Washington.
According to reports, David Marcus, the head of Facebook Financial (F2), met with authorities in Washington earlier this month.
Marcus pushed for the importance of crypto in widening access to financial goods, according to anonymous sources present at the meeting, while touting the benefits of Diem’s payment app Novi.
According to Diem executives mentioned in The Washington Post, authorities are pleased with some of the project’s architectural revisions. Diem’s original mandate, which was released in 2019, has undergone considerable changes.
The Facebook-sponsored project, dubbed Libra at first, was intended to be a worldwide payment system with a “Facebook Coin” backed by a basket of fiat currencies.
In the Diem paradigm, the project aims to produce separate fiat-pegged digital currencies, starting with a stablecoin backed by the US dollar. Diem has also attempted to allay regulatory concerns about money laundering.
However, sources in Washington claim that major politicians including as Treasury Secretary Janet Yellen and a number of members of Congress are opposed to privately created stablecoins.
Senator Elizabeth Warren, for example, recently referred to cryptocurrency as the “new shadow bank,” while also expressing reservations about stablecoins.
The growing worry about crypto in the context of money market funds outside of the legacy banking system framework could provide substantial regulatory issues for Diem and other private stablecoin projects.
Meanwhile, traditional finance players continue to press for the development of a central bank digital currency, or CBDC.