Meta rules out cryptocurrency initiative amid confrontation with Fed: report

Meta rules out cryptocurrency initiative amid confrontation with Fed: report

Meta is now exploring selling its roughly one-third stake in Diem, according to the outlet.  The Federal Reserve said it could not guarantee that it would allow the Diem project to go forward, according to Bloomberg.AFP via Getty Images In addition to Meta, other partners in Diem include venture capital firms Andressen Horowitz and Union Square Ventures, as well as Uber, Shopify and the Singaporean state fund Temasek. 

Despite lawmakers’ opposition, Diem and Silvergate Capital — a fintech bank that was planning to issue the stablecoin — had pushed forward with their plans until they met resistance from the Federal Reserve in 2021, Bloomberg reported on Wednesday.  But from the moment that Meta and its partners unveiled plans for a stablecoin in 2019, the idea met resistance from regulators, who expressed concern about letting the scandal-plagued company control a chunk of the global financial system. Zuckerberg defended the project in a contentious contentious Congressional hearing later that year.

Following several rounds of talks, Fed officials told Silvergate in the summer of 2021 that the central bank could not guarantee that it would allow the Diem project to go forward, according to the report. Silvergate was then left with no way to issue the stablecoin, Bloomberg reported.  Backers of the stablecoins say they have the potential to transform global finance by offering the seamless transaction speeds of cryptocurrencies without the price volatility of bitcoin or ethereum.

“Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy,” the report said.  Meta is reportedly looking to sell its one-third stake in Diem. Getty Images Since stablecoins can pose risks including “destabilizing runs, disruptions in the payment system, and concentration of economic power,” any entity that issues a stablecoin should be regulated like a bank, the agencies said. 

Backers of stablecoins say they have the potential to revolutionize finance. Getty Images In November, a report issued by the US Treasury with contributions from the Fed, Securities and Exchange Commission and Commodity Futures Trading Commission called on Congress to crack down on issuers of stablecoins.

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