The company is in talks to partner with stablecoin issuers to use their products. How the project was created and what problems it faced.
Facebook-owned Novi Financial, a digital wallet company, is negotiating cooperation with third-party stablecoin issuers, The Block reports, citing its own sources.
Circle and Paxos are named among potential project partners. This may mean that the corporation has finally moved away from the idea of issuing its own cryptocurrency.
How it all began?
On June 18, 2019, Facebook made an official announcement of the Libra cryptocurrency, the Libra Investment Token and the Calibra digital wallet.
The project managers announced that they tentatively plan to launch the network in the first half of 2020.
Immediately after that, financial regulators in the United States and other countries called on the social network to suspend development in order to have time to evaluate the project.
Initially, Libra Associations included major companies such as MasterCard, Visa, Vodafone, PayPal and others.
However, after criticism of the project by financial regulators, they all refused to participate in the development of Facebook own cryptocurrency.
Also, the corporation had to abandon plans to release its cryptocurrency due to disagreements with regulators.
Instead of developing a single digital currency as part of the Libra project, the company announced that it will introduce several stablecoins backed by different national currencies such as the US dollar, euro, British pound and Singapore dollar.
In May 2020, Facebook rebranded the digital wallet, renaming it from Calibra to Novi.
In December, the Libra Association consortium changed its name to Diem Association. In this regard, the name of the Libra cryptocurrency was changed to Diem.
The company explained that this was due to the negative that the early version of the project received.
Then, in January of this year, the company planned to obtain a license from the Swiss Financial Market Supervision Authority (Finma). However, this did not happen.
Also in 2021, the Diem Association and the Silvergate bank entered into an agreement, according to which the financial institution became the exclusive issuer of the Diem stablecoin.
The Block’s sources are now reporting that Novi Financial is going to use USD Coin (USDC) and Paxos Standart (PAX) stablecoins in its wallet.
At the same time, Silvergate claims that cooperation with the Diem Association remains in force, and the financial institution is the exclusive issuer of the Diem stablecoin.
What is the reason and what will happen next?
After the beginning of negative rhetoric towards Libra and Facebook in particular, it became obvious that regulators would not allow this project to start and function, and the failure of TON from Telegram only strengthened the understanding that Facebook cryptocurrency is unlikely to come out, said lead analyst at 8848 Invest Viktor Pershikov …
In the summer of 2020, the founder of Telegram, Pavel Durov, announced that she returned $ 1.2 billion to ICO investors.
This happened after the American court banned the distribution of Gram tokens, since it recognized them as a security.
According to Pershikov, the main problem of the Libra project was and is that this project is an obvious opposition to classical financial institutions and payment structures, for which a loosely controlled and unregulated digital currency is both a challenge and a competitor.
“It is unlikely that we will see alternative Libra projects in the near future, since Facebook negative experience in launching its own private cryptocurrency gives the community an unambiguous hint that it is not worth entering the territory of central banks,” the expert is sure.
Andrey Podolyan, CEO of the Cryptorg crypto exchange, disagreed with him. According to him, Facebook possible abandonment of plans to release its own cryptocurrency is not associated with pressure from financial regulators.
“Facebook is focused on developing its own metaverse. This will be a trend at the intersection of virtual reality and social interaction.
Perhaps the company decided that this area is now more important for it and did not spread its energy on its stablecoin, having entered into a partnership with Circle and Paxos, ”Podolyan said.
He stressed that what is happening with Libra does not mean that Facebook will not release its own cryptocurrency in the future.