In a significant twist of events, Diem, formerly Libra, has withdrawn its payment systems application in Switzerland. Diem had submitted an application to Switzerland, a crypto-friendly jurisdiction, in anticipation of launching a global cryptocurrency. The Swiss Financial Market Supervisory Authority (FINMA) said that Diem Networks GmbH was already at an advanced stage in its application process.
According to FINMA, Diem is now planning to launch a payment system from the USA in a first phase and target the US market with a US dollar-based stablecoin.
The original application submitted to FINMA was based on a stablecoin linked to a basket of currencies. The concept of a global non-sovereign digital currency raised the concern of global policymakers. Additionally, if Diem had included interest-bearing securities in the basket, such as US treasuries, the interest generated by the crypto could have created a security and thus regulated as such in the US.
The Diem cryptocurrency has since been revised to “reflect significant changes that were made to the project.”
Diem was initially conceptualized by Facebook – a global social network poised to benefit from an internal payments platform. Over time, a stand-alone entity was created in Switzerland with a diverse group of stakeholders including organizations expected to support the eventual cryptocurrency.
As revealed today, Diem will now be a US dollar-based stablecoin competing with the likes of USDC and Tether – two established stablecoins doing billions in transactions on a daily basis. Diem’s decision to backtrack on its original mission represents a dramatic retreat from its early ambitions but will now make the crypto more palatable to global regulators.