19:49 | 18/05/2021 Print-->
*Diem is born from the ashes of Facebook's failed Libra project, but can you trust it?
*Meta, the company formerly known as Facebook.
Diem is a proposed cryptocurrency currently in development by a group of technology and finance companies collectively known as the Diem Association. While you may not have heard about "Diem" before, you may have heard of it by its former name, "Libra."
The Diem Association rebranded from Libra in early 2020, relatively early in its development. Tech giant Facebook was heavily involved in the project early on, leading many to distrust the project due at least in part to Facebook's less-than-spotless reputation when it comes to issues of data handling.
On paper, Facebook is only currently involved through their Novi project. Novi is one of the member companies in the Diem Association and will serve as the digital wallet for Diem coins.
Whether it's called "Diem," "Libra," or "Zuck-bucks," the idea behind Libra is pretty sound. The proposed cryptocurrency includes many international and multinational stablecoins and will be backed by a reserve of cash and cash equivalents. This basket of currencies and reserves is collectively called "The Libra Reserve."
The goal is for this unique approach to make Diem a low-cost cryptocurrency that anyone can use anywhere, including in transactions made by users operating in different currency zones. It will also protect the price of Diem from the volatility experienced by other cryptocurrencies, potentially including other stablecoins.
Colbeci’s departure from Meta is the latest in a string of high-profile exits at the company.
Marcus, who also co-created Meta’s Diem digital currency project, is set to leave by the end of 2021. Morgan Beller, another co-founder, left last year.
Meta has struggled to get its crypto initiative off the ground amid intense scrutiny from regulators, who worry it could disrupt the financial system and lead to criminal activity such as money laundering.
Diem, a proposed stablecoin backed by a consortium of firms including Meta, was initially envisioned as a single token underpinned by a basket of sovereign currencies.
Originally known as libra, the digital coin has since been watered down significantly, with the group overseeing it now only planning to release a version tied to the value of the U.S. dollar.
Checkout.com joined the Meta-backed Diem Association last year, following a spate of withdrawals from major members like PayPal, Visa and Mastercard.
Novi, Meta’s crypto wallet, was recently released as a pilot with a handful of users in the U.S. and Guatemala. It is using a lesser-known stablecoin called paxos rather than diem.
Unlike most cryptocurrencies, stablecoins are intentionally designed to prevent volatility, with most tracking the price of government-backed currencies like the dollar.
Internal Diem documents tend to avoid calling Diem a "stablecoin" or a "cryptocurrency," referring to Diem instead as a "payment system." This is likely partially to the concerns that individuals and lawmakers have regarding cryptocurrencies. However, while Diem is a cryptocurrency in technological terms, it is also fairly unique in terms of its operation.
Diem transactions will be transactions of digitally minted coins, just like any other cryptocurrency. However, Diem focuses less on the exchange of Diem coins as their own currency and more as a means of seamlessly exchanging different currencies.
Further, while Diem transactions will be blockchain-based, the Diem Association focuses on "compliance and the prevention of illicit activity." Other cryptocurrencies have historically used blockchain to afford anonymity, but blockchain itself is inherently transparent, potentially making it a tool for observation and enforcement.
That Diem is run by a known association isn't necessarily something out-of-the-ordinary. Bitcoin is famously decentralized to the point that we don't even know the actual people or person behind it. However, most other cryptocurrencies are run by a known person, company, or group.
That said, the compliance angle, the currency interoperability angle, and the makeup of the Diem Association itself make the group unique in the cryptocurrency ecosystem. This is largely why the project has been so long in production. The Diem Association is working with compliance groups and governments in ways that other cryptocurrency minters have not.
In fact, the Diem Association's CEO is Stuart Levey, who formerly served as Undersecretary for Terrorism and Financial Intelligence for the United States Department of the Treasury. Chief Legal Officer is Steve Bunnell, formerly General Counsel of the Department of Homeland Security.
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As the whitepaper mentioned, Diem is not out to replace fiat currencies or our traditional financial system. It is aimed at providing an alternative for traditional forms of money transfer. This is mainly beneficial for those who have no access to financial institutions.
With just a smartphone, users can send and receive money digitally. This will open up a lot of financial opportunities for individuals and businesses alike. The value of Diem will not fluctuate as much as cryptocurrencies, due to it being a stablecoin pegged with the US dollar.
And while data privacy remains a concern, Diem is reportedly no longer under the control of Facebook as per the revised whitepaper released in December this year. Diem is a non-profit organisation owned by 27 different member firms.
Our traditional financial system is yet to open its gates for digital cash. Although cryptocurrencies have been around for more than a decade, not everyone shown interest or invested in it. Diem can be the right step towards digital currency adoption.
All of this begs the question: Who is Diem for?
The Diem Association would say that Diem is for everyone. Diem's low cost and low hardware requirements have the potential to provide financial tools to millions of unbanked people around the world, as well as expanding options to people who regularly transact in multiple currencies.
Critics would say that the Diem is for the Diem Association and the organizations and governments that it works with. Diem gets un-contested access to a vast international market. Not to mention the governments and organizations that it works with potentially get access to information regarding Diem users and transactions.
Many cryptocurrency enthusiasts believe (and hope!) that the biggest winner will be other cryptocurrencies. This position sees Diem as essentially an onramp for people who are not currently interested in cryptocurrency but will be introduced to the market by Diem and then look elsewhere for less regulated options offering similar solutions.
We hear you. Facebook doesn't have a great reputation for privacy protection.
The social network says don't worry -- not that you expected it to say anything else. When the plans were first unveiled, Facebook took pains to point out its wallet was housed in a subsidiary of the social network. The arrangement was designed to allow the wallet company to be regulated by authorities and prevent money laundering and other financial crimes. The company also said it would keep financial data separate from Facebook's social data.
Diem Association (formerly Libra Association) faces legal challenges as both the name and the logo of the digital currency are already in use within different territories.
Finco Services, Inc has filed a lawsuit with New York Southern District Court against Facebook, Inc., Novi Financial, Inc., Jlv, LLC and Character SF, LLC for an alleged trademark infringement arising out of the use by the latter of a logo similar to the start-up bank operated by Finco Services, Inc. The plaintiff has requested a preliminary and permanent injunctive relief as well as monetary relief from the defendants. A settlement conference in this matter is scheduled for March 26, 2020 in the United States Courthouse, while the parties did not consent to conducting the proceedings before a magistrate judge and requested to be tried to a jury.
In Europe, Libra Association has filed an application with the European Union Intellectual Property Office for the registration of the word “LIBRA” as a verbal trademark. The proceeding has already received five oppositions to registration from four European companies based mainly on the alleged likelihood of confusion with their prior trademarks.The opposing companies are Lyra Network, Libra Internet Bank, Libri GmbH and Advanced New Technologies Co., Ltd. In April 2020, the parties will reach the adversarial part of the opposition proceedings, unless a settlement is reached during the cooling-off period.
While there is reason to be skeptical of Diem, the proposed cryptocurrency is blazing new trails, and it just might be the money of the future.
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