A popular mantra in Silicon Valley is “fail fast.” It took Facebook less than three years to fail in its high-profile cryptocurrency project.
Facebook’s shuttering of the project, which would have created a way for users to pay for things and send each other money that wouldn’t need to go through the regular financial system, came in response to internal clashes over its direction and sustained opposition in Washington, according to four people familiar with the effort who spoke on the condition of anonymity to describe sensitive matters.
The company has had previous failures and product shutdowns, most notably an effort to build a smartphone a decade ago. But the decision to fold the project called Diem is the first that appears to relate directly to regulatory pushback, suggesting that bringing future products to market in heavily regulated spaces will be an uphill battle, the people said. That could complicate Facebook’s plans for its virtual reality metaverse.
“All of this scrutiny has an effect,” said Luther Lowe, senior vice president of public policy at Yelp and a longtime proponent of tougher antitrust policing of the biggest tech companies. “That’s a really important thing to keep an eye on right now because we’re on the verge of a new paradigm.”
Diem was effectively doomed from the start, the people familiar with the effort said. It was announced in 2019 with great fanfare under the name Libra. Foreign governments, members of Congress and regulators expressed fears about the project immediately, saying Facebook wasn’t prepared to address concerns about money laundering, consumer protection and other potential financial risks. Two years later, after a rebranding to Diem and an overhaul of the project’s design so that it would be pegged to the U.S. dollar to create more stability, it faced even greater resistance from regulators, who said the company acted arrogantly, according to one of the people.
The failure comes as crypto becomes more mainstream, despite a recent drop in prices. According to Pew Research, 16 percent of Americans have invested in or traded cryptocurrencies, and apps like Coinbase and Robinhood see billions of dollars in cryptocurrencies transact on their platforms every month. Some of Facebook’s Big Tech competitors are dipping their toes in the space too, with Google hiring a team of engineers to work on blockchain technology, which underpins cryptocurrency.
In recent months, Diem’s leaders have left the company, including project co-founder Kevin Weil and David Marcus.
Teams that worked on the project were notified of the shutdown just over a week ago, and a skeleton crew of roughly 50 people remains to help run a pilot on Facebook’s cryptowallet overseas, one of the people said.
The company will now sell Diem’s assets to the California bank Silvergate Capital, which serves bitcoin and blockchain firms, for about $200 million, according to two of the people. The Wall Street Journal and Bloomberg News previously reported the sale.
“Their reputational and trust issues kind of doomed it from the start,” said Brian Boland, a former Facebook vice president who resigned last year over concerns that the company’s social media service was accelerating societal polarization.
Credit to @ washingtonpost
