Diem Association chief economist Christian Catalini announced the readiness of Diem stablecoin developers to cooperate with regulators. Diem is marketed as a temporary replacement for the digital US dollar.
Since the publication of the Libra (now Diem) White Paper in 2019, this project has received “many blows” from regulators around the world. They began to criticize the not yet launched stablecoin, fearing that its launch could threaten the entire banking industry.
Many large companies have expressed great interest in Libra. Others, such as Visa, Mastercard and eBay, have decided to leave the project, possibly due to regulatory pressure. Later, the developers announced that they would “collect” Libra from several stablecoins pegged to fiat currencies. In December, it became known that the developers will not launch a multicurrency stablecoin, but will limit themselves to one crypto asset called “Diem Dollar” pegged to the US dollar. However, the repeated modernization of the project and its renaming as Diem did not increase the trust of the regulators.
In a speech at the Consensus 2021 conference, Diem Association economist Christian Catalini said the original Diem stablecoin concept was “naive” and unprepared to go to market. The creators of stablecoin have already “learned this lesson” and began to actively interact with regulators around the world, increasing the level of consumer protection and introducing new tools to prevent financial crime. Catalini hopes that Diem will be successful in the long term by working closely with regulators.
The economist commented on the recent speech of Lael Brainard, a member of the US Federal Reserve Board, who expressed fears that state-owned cryptocurrencies could affect the entire global financial system. Catalini said that today both stable cryptocurrencies and digital currencies of central banks can be called stablecoins. According to Catalini, Diem will be completely different – it is ready to become a substitute for the digital dollar, the development of which has been actively discussed in recent months.
“Diem could be a ‘temporary warm-up’ before the launch of the state cryptocurrency. The US financial system can evolve if the digital currency of the central bank serves as the base layer, and Diem serves as a payment network that will re-use developments in the public sector, ”Catalini said.
He added that Diem would not need licenses in this case, so the association withdrew its applications for them. Catalini made it clear that Diem developers are willing to work with other central banks to find joint solutions that meet local regulatory requirements. The Diem Association continues to strive to improve public access to financial services, but this requires work to improve identification standards. It may take several more years.
