Facebook is preparing to launch its cryptocurrency, Diem, by the end of this year. However, its efforts to convince the Biden administration about Diem’s safety have run into the same issues that were encountered two years ago.
On Friday, The Washington Post cited two anonymous sources acquainted with the discussions between Facebook and Treasury officials, According to these sources, the US Treasury Department is concerned about Diem’s potential impact on the financial system.
Despite the complete overhaul, Diem is facing regulatory scrutiny for its association with Facebook, which can easily scale its services to billions of people.
A watered-down version of Facebook’s ambitious Libra project, Diem will be pegged to the US dollar, much like Tether’s USDT and USD Coin(USDC). This puts Diem in the Stablecoin territory, which is on the radar of Treasury officials lately. In July, Treasury Secretary Janet Yellen urged regulators to quickly establish a framework for stablecoins. She also convened a working group of agencies to “collaborate on the regulation of this sector and the development of any recommendations for new authorities.”
Irrespective of regulatory pressures, Facebook is pressing ahead with Diem. The company’s extensive lobbying campaign has reached out to several lawmakers. Just last week, Facebook’s Financial Head, David Marcus met with regulators in Washington on the issue. In these meetings, Marcus discussed the benefits of cryptocurrencies for unbanked people and made a case for Facebook’s upcoming digital wallet, Novi.
Ultimately, Facebook’s problems with the Biden administration boil down to one core issue -- trust. The company has had a difficult time with public officials with a barrage of controversies in recent years. Even now, Facebook is entangled in an antitrust case brought by the U.S. Federal Trade Commission and receiving flak for the spread of pandemic-related misinformation on its platform.
Marcus is well-aware of the “trust” issue and has tried to tackle it in his recent engagements. "If there's one thing we need, it's the benefit of the doubt," he said in a recent interview. "[W]e're starting with a trust deficit that we need to compensate."