Facebook-backed digital currency project, Diem Association, is launching a pilot with a single stablecoin pegged to the US dollar later this year, CNBC reported.
As the adoption of crypto-currencies grew in the wake of pandemic Diem lost the support of many initial partners like Visa and Mastercard, both of whom have moved to supporting cryptos. Diem’s decision to pursue a stablecoin model is essentially, a dilution of the original idea for a digital currency that would be indexed to a basket of global currencies.
Attributing to an anonymous source, the report said that the association will launch a digital currency called ‘Diem’ in a small-scale pilot which will focus largely on transactions between individual consumers. It said that there will be an option to buy goods and purchases with the currency. The Diem project is currently in talks with Swiss regulators to secure a payment license, the report said. CNBC could not confirm a date for the launch.
According to a recent report by the Citi Group, Diem could become a white label central digital currency (CBDC) provider. “Diem is also designed to enable a very high degree of interoperability between different participants, whether these are banks, financial institutions, service providers, like wallet providers to consumers, payment service providers, etc. And
can build an infrastructure layer on top of future national CBDCs,” it said.
Bank in 2019, Facebook began bringning together various startups and financial services giants to create a global digital currency called Libra. However, after facing massive opposition from regulators around the world many companies decided to withdraw forcing the association to go through a complete makeover.
While cryptocurrencies are priced based on their perceived value, stablecoins have an intrinsic value based on the underlying fiat-currency. So for instance, 1 Bitcoin may be worth over $18,000 today, a stablecoin’s price is pegged more or less in line to the underlying currency. There are several US dollar denominated stablecoins in the crypto universe including Tether, USD Coin and Celo Dollar.
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