After three years of development, and a raft of changes to its name, scope, leadership and purpose, it seems like Meta’s trouble cryptocurrency project may soon come to an end.
According to reports, Meta’s looking to pull the pin on its Diem/Novi crypto project, with company representatives seeking expressions of interest on its sale.
As reported by Bloomberg:
“The Diem Association, a cryptocurrency initiative once known as Libra backed by Meta Platforms Inc., is weighing a sale of its assets as a way to return capital to its investor members, according to people familiar with the matter. Diem is in discussions with investment bankers about how best to sell its intellectual property and find a new home for the engineers who developed the technology, cashing out whatever value remains in its once-ambitious Diem coin venture, said the people, asking not to be identified because the discussions aren’t public.”
That would be a significant step back for Meta, which launched its original Libra crypto project to much fanfare in 2019, with former PayPal chief David Marcus at the helm of the initiative.
But the project saw strong resistance from the start.
Maybe it’s because it was coming from Meta (then Facebook), or maybe it was due to widespread distrust of crypto projects, but many regions came straight out and said that they would not support the company creating its own currency. The public backlash saw many of the initial big-name backers pull out, including Visa, Mastercard and PayPal, all key names which had leant credibility to the initial concept.
That, already, put the entire experiment in limbo, because without the support of major financial institutions, Meta's options for the project were limited. It seemed, then, that the project would likely fade away, but then in May 2020, Meta announced that it was changing the name of its crypto wallet from Calibra to Novi.
In October last year, after a long period of no news, then Novi chief David Marcus announced the next major step forward for the project, with the launch of a pilot of its Novi digital wallet in the US and Guatemala, enabling users to send and receive money between the two regions.
That was the first concrete steps we’d seen in making the project a workable reality, but still, many regions are still very skeptical of cryptocurrency, and with India, in particular, moving to ban cryptocurrencies outright, the value of the project was also lessened, potentially to the point where it’s now no longer viable in broader terms.
India, it’s worth noting, is where Meta sees the most potential for money transfers and eCommerce, as it looks to cement its apps as key connective tools in the emerging market.
Shortly after the launch of the Novi payments pilot, David Marcus left the project, and maybe that was the final flag, the signal that it was just never going to make it.
Which now leads to these new reports, that Meta’s looking to sell it off – though it is worth noting that the reports suggest that Meta is looking to get out of the Diem Association, the parent group overseeing the project, with no mention of the Novi payment project specifically.
I would assume that they are intrinsically tied together, but maybe there’s a way for Meta to continue to support and develop its Novi payments option independently, though that does seem like a stretch.
So what would a sale of Diem, and the failure of Meta’s crypto push, mean for crypto more broadly?
I mean, resistance is steadily growing for cryptocurrencies in general, with more regions now moving to cut them off completely, including Russia, China and Indonesia in recent months. A report published the Library Law of Congress late last year showed that the number of countries and jurisdictions that have either banned or restricted cryptocurrencies has more than doubled since 2018, due to concerns around scam activity, market price fluctuations, and environmental impacts as a result of crypto ‘mining’.
Yet, at the same time, many western nations are seeing a boom in sales of crypto-aligned projects like NFTs, and with Web3 advocates essentially tying the growing tech movement into crypto development, it is actually gaining momentum in some circles, despite concurrently rising concerns.
But as noted, western markets are not where Meta saw the most potential value in its crypto project. Meta’s real aim has been to build native, in-stream payments into its apps, in order to further embed their use into developing markets, like India and Indonesia. Both of these regions see high remittance activity, with people transferring money back to family, and Meta originally saw Diem as a vehicle for removing fees from such exchanges, which would then get more people moving their money through Facebook and WhatsApp.
And once they’re already shifting their money around in its apps, that would make it much easier for Meta to parlay that behavior into eCommerce, expanding utility, and importance, for the millions of people in these markets.
But it does seem like that’s not to be - and given that, it makes sense for Meta to move on.
Though it’s not a great endorsement for the potential of crypto, in a broader sense. If Meta, with all of its resources and influence, can’t find a real use case for crypto, does that suggest that its potential value is not as high as some advocates think?
That might be a stretch, but as more regions move to ban crypto projects, and more big players step away from the sector, it does seem like the challenges are rising, which could, eventually, put the brakes on the entire crypto movement.
UPDATE (1/26): The Wall Street Journal has reported that Meta is selling its crypto project to Silvergate Capital for around $200 million.