The Diem Association, a cryptocurrency initiative once known as Libra backed by Meta Platforms Inc., is weighing a sale of its assets as a way to return capital to its investor members.
In 2019, when Meta’s Facebook first unveiled the idea of its stable digital currencies — stablecoins — aimed at revolutionizing global financial services, they did so in collaboration with dozens of other companies. But the consortium wasn’t enough to protect the project from worldwide regulatory scrutiny. After Zuckerberg was called to testify, some partners abandoned the project and it changed its name to Diem. Diem’s ambitions scaled back and its founder, David Marcus, left Meta last year. The association struck an arrangement with Silvergate Capital Corp. to issue Diem, but resistance from the U.S. Federal Reserve dealt the effort a final blow, the people said.
Diem said in May that an affiliate of the firm, Silvergate Bank, was to be the issuer of the Diem USD stablecoin, a type of cryptocurrency pegged to the U.S. dollar that’s typically used to buy and sell other crypto. After a lengthy back-and-forth between the Diem advocates and regulators, Fed officials finally told Silvergate last summer that the agency was uneasy with the plan and couldn’t assure the bank that it would allow that activity, the people said.
Without a green light from the bank’s regulator, Silvergate was left unable to issue the new asset with confidence the Fed wouldn’t crack down, and so the Diem effort had no coin.
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