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Saturday, July 24, 2021

Facebook’s stablecoin Diem subordinates itself to CBDC

Once heralded as the future of global finance, Facebook’s stablecoin Diem (formerly Libra) appears to be subordinate to digital central bank money. Christian Catalini, chief economist behind Diem, apparently sees the crypto project more as a complement to a state-run CBDC.
Stablecoin Diem should only be pegged to the US dollar
• Diem only as a supplement to state CBDC
• Silvergate Capital should provide the infrastructure for Diem

The strategy change of the Facebook currency

The ambitious project started in 2019 under the name “Libra”. A new, digital payment system with the digital currency Libra should be launched worldwide. Designed as a stablecoin, Libra should be linked to a currency basket consisting of dollars , euros , pounds , yen and Singapore dollars . In the meantime, the crypto project has been renamed from Libra to Diem (December 2020), the head office has been relocated from Switzerland back to the USA and the US dollar remains the only local currency for the stablecoin to be mapped for the time being. Close cooperation with US regulators also appears to be a central part of the new Diem strategy. Here Diem is apparently only supposed to play a subordinate role behind a digital central bank currency (CBDC – Central Bank Digital Currency). (Also Read: Ripple (XRP) brings sidechains into play)

Diem is subordinate to state CBDC – just an addition

Progress in crypto regulation in Washington was cited as the reason for the return to the US, according to Anton Livshits of BTC-Echo. In addition, Christian Catalini, chief economist of the Diem project, clearly subordinates himself to the authorities and a state-owned CBDC: “The public sector has a great competitive advantage in developing everything to do with stability, money, value preservation and macro-prudential policy we don’t want to change anything. Rather, we want to build on this infrastructure and use it to accelerate use cases for consumers both domestically and worldwide, “said the economist. Here Catalini envisions a state CBDC as the basic layer of a multi-layered model in which Diem acts as a complementary payment network. (Check: Binance (BNB) coin prediction: Is it still worth to buy 2021)

Working with a bank

Furthermore, the Diem project will in the future work together with the Californian bank Silvergate Capital , as Astrid Dörner from Handelsblatt reported. The US bank is supposed to provide a large part of the infrastructure for the cyber currency. In cooperation with Silvergate Capital, a stable coin is to be brought onto the market that is linked one-to-one to the US dollar. The coin will be issued via Silvergate and use the bank’s infrastructure, as the Diem Association itself announced. The Californian bank is known as a crypto advocate and the crypto trading venues Coinbase and Gemini are also Silvergate customers. (More: El Salvador is making Bitcoin legal tender )

The start of the stablecoin Diem

While the market for decentralised cryptocurrencies is moving more and more into the focus of investors and has recently experienced a certain hype, as can be seen from the performance of Bitcoin or Ethereum , according to Handelsblatt it is still unclear when the Diem project will start. By contrast, CNBC’s Ryan Browne reported in April this year that the Diem Association intends to launch a pilot project with a stable coin pegged to the US dollar in 2021. The pilot project should not be accessible to everyone and is likely to focus on transactions between individual consumers.

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