The Diem Association is gearing up for the launch of its stablecoin, a project that has been transformed since it was conceived as Facebook’s Libra currency. In April 2020, it applied for a payments licence with a revised proposal, and a few months later, in December, it rebranded from Libra to Diem (from the Latin for ‘day’). But so far it hasn’t been a case of carpe diem – seizing the day – but rather waiting until launch day.

The expected January 2021 launch date has been and gone, and there are murmurs the Diem dollar could still be launched in the first quarter of this year. There are also signs the wider payments ecosystem is preparing for the launch. In February 2021, for example, crypto custodian Fireblocks announced it would be supporting the Diem infrastructure, as well as First, which enables merchants to accept Diem payments.

Unlike the wild ride of Bitcoin, a stablecoin is backed by an asset to keep the value of the cryptocurrency stable. If the Diem dollar stablecoin does get off the ground, it would be a cryptocurrency that is integrated into the existing financial system and will result in faster, cheaper payments.

In a pre-launch session hosted by the Official Financial Institutions Forum (OMFIF), Diem Association’s Chief Economist, Christian Catalini commented that the project has matured since it was first announced in June 2019. “Part of that is really the result of the invaluable conversations that we had with a number of regulators across the globe in response to the first version of the white paper, but also the upgraded and second version,” he said. “We had to make a number of changes to the original concept,” he says. “We think this really drives towards stronger consumer protections, better frameworks for fighting financial crime on the network and also for laying out what the governance of Diem would look like in a world where central banks are progressively approaching the concept of central bank digital currencies (CBDCs) at an increasingly rapid pace,” he says.

In the revised whitepaper, there is a clear intention for the currency to be interoperable with the existing financial system and “integrate smoothly with local monetary and macroprudential policies and complement existing currencies by enabling new functionality, drastically reducing costs, and fostering financial inclusion.” Catalini in his OMFIF presentation commented that this interoperability is one of the key tenets of the network. Also, he said, Diem will drive innovation as well as a reduction in payment costs.

Diem initially plans to launch the Diem dollar, a single stablecoin that is backed by the US dollar. This differs from the original plan of having the stablecoin backed by a basket of currencies – rather the aim will be for a number of single stablecoins backed by assets in a single currency. For example, the Diem dollar will be backed by a reserve of cash, cash equivalents and short-term government securities denominated in US dollars. Catalini explained that the starting point for the project is the Diem dollar. “We still have a concept of a multi-currency coin, although it’s not part of the initial plan,” he said. “We also did some major changes to how that multi-currency coin would be defined but the basic intuition is that these single currency stable coins are really the building blocks of the network.”

This, however, is all subject to the approval of the regulator. The Diem Association is based in Geneva, Switzerland which means that its regulator is the Swiss Financial Market Supervisory Authority (FINMA). It put out a statement in April 2020 to confirm it received Diem’s application for a payments licence, but has otherwise been tightlipped: “In accordance with its usual practice, FINMA will neither provide public information on the status of the ongoing procedure nor speculate on when it may be complete.”