According to Bloomberg, the introduction of Meta Platforms Inc.'s Diem project, formerly known as Libra, in 2019 caused significant concern among finance officials. The project, a US-dollar stablecoin, was the first significant challenge to central bank money from digital assets. It was met with immediate and sustained criticism from global authorities until its eventual discontinuation. Diem was intended to revolutionize digital payments, but bank officials saw it as a tech company with the power to issue new money to a large user base, potentially leading to an excessive concentration of economic power.
Today, the stablecoin world is in transition, with regulators still focused on preventing a future threat similar to Diem. They are often influenced by their past experiences when forming new regulations. Despite the role regulators see stablecoins playing, they require thoughtful regulation, focusing on the right risks and not allowing past reactions to Libra to unduly influence their approach.
Meta's lasting impact is evident in early consultations on stablecoin regulation by the European Banking Authority, which is set to oversee the sector from July. Additionally, regulators like the Financial Stability Board, the Bank of International Settlements, and the Bank of England continue to express concerns about the potential impact of Big Tech entering the stablecoin space.
Sarah Breeden, the BoE’s deputy governor, mentioned the possibility of stablecoins being used at scale for retail payments, citing PayPal’s PYUSD, which launched last August, as a clear example. Other stablecoin projects are also on the horizon, with initiatives coming from Deutsche Bank’s DWS, Galaxy Digital, and Ripple Labs.