Meta-Backed cryptocurrency, Diem, is shutting down after years of trying to make it the top stablecoin in the market. After multiple attempts at rebranding, instances of nearly shutting down, and several congressional hearings, Diem announced that it would not be selling all of its assets and closing down shop.
The cryptocurrency, which is heavily backed by the social media giant, said Monday that it had signed a deal to sell all of its assets to the cryptocurrency-focused bank, Silvergate, for $200 million.
Diem's chief executive officer, Stuart Levey, said in a press release that the decision to shut down was made after it became clear that it could not move ahead with its plans due to regulatory restrictions. He added that their negotiations with federal regulators had hit a wall, and it was no longer feasible to continue operating.
Meta, formerly Facebook, had heavily invested in the stablecoin, which it was planning to roll out to its users. Facebook initially created several apps that would have allowed people to use digital currency online. At the same time, Facebook had launched its Libra project, which sparked fears of the company creating an online monopoly. Just months after the Libra Association was formed, the project faced significant scrutiny.
Stablecoins, such as Libra and Diem, are types of cryptocurrencies that are pegged to actual assets with value. The values of these types of digital currencies are often pegged to a fiat currency such as the U.S. dollar or the price of a commodity such as gold.
Libra debuted at a time when stablecoins were still a relatively new concept, and regulators were not closely scrutinizing them. Given the size of the stablecoin sector since 2019, governments all around the world started to take notice and consider implementing legislation to regulate their use.
The U.S. Treasury suggested in November that stablecoins should be regulated like banks. The White House also intends to direct federal agencies to regulate cryptocurrencies as an issue of national security.
While Diem may be shutting down, it isn't yet clear what Silvergate's plans would be for the particular cryptocurrency. While Diem's demise might have been directly the result of its ties with Facebook, the stablecoin was one of the more transparent and regulator-friendly in the market.
Meta, which had already given up on Diem, promised that it would not be enforcing its patents on the technology used for the cryptocurrency. This means that other crypto developers will be free to use them to develop their own digital currencies. Twitter's Jack Dorsey described the decision as a "good idea."
