Ex-Facebook Executive Claims Diem/Libra Stablecoin Was 'Politically Killed'

Diem, the ambitious stablecoin project backed by Facebook, faced a sudden end, and now, former Facebook executive David Marcus is speaking out. He claims that political interference, led by Treasury Secretary Janet Yellen, was the reason behind its shutdown. In this article, we’ll explore Marcus’s accusations, what really happened to Diem, and how politics may have played a role in derailing this innovative project.

Ex-Facebook Exec: Diem Stablecoin Was 'Politically Killed'

A former Facebook executive has opened up about why the company’s stablecoin and blockchain project, originally called Libra and later renamed Diem, ultimately collapsed. The ambitious initiative, which aimed to transform digital payments, was sold to Silvergate Bank in January 2022. Unfortunately, the project was abandoned by Silvergate a year later, with the bank writing off its investment entirely.

David Marcus, who led the project and once served on Coinbase's board, believes politics, not regulations, caused its downfall. In a candid post on X, he called it "100% a political kill," claiming that the decision to shut it down was driven by behind-the-scenes political pressure rather than legal or regulatory reasons.

“There was no regulatory path left to shut the project down. This was purely political—executed through the intimidation of reliant banking institutions,” Marcus explained.

According to Marcus, the Diem team spent two years making countless changes to satisfy lawmakers and regulators. Despite limited backing from some Federal Reserve officials, including Chair Jay Powell, the project faced significant resistance from Treasury Secretary Janet Yellen. Marcus alleged that Yellen expressed her concerns to Powell during one of their biweekly meetings, warning that the project could create political backlash.

Marcus described Yellen’s opposition as the final nail in the coffin, writing, “That was the moment Libra was effectively killed.”

How Concerns Over Power and Control Ended Diem?

David Marcus detailed how the Federal Reserve quickly stepped in to pressure the banks involved in the Diem project. He explained that the Fed’s general counsel held calls with participating banks, delivering a prepared message: "We can’t stop you from moving forward and launching, but we are not comfortable with you doing so." According to Marcus, this warning effectively sealed the project’s fate. "And just like that, it was over," he wrote.

At the time, regulatory concerns over Facebook’s involvement in a financial system were at the forefront. Politico reported that Facebook’s business model, combined with its potential control over a large portion of the financial ecosystem, alarmed regulators. In November 2021, the President’s Working Group on Financial Markets released a report on stablecoin regulation, stating, "The combination of a stablecoin issuer or wallet provider and a commercial firm could lead to an excessive concentration of economic power." This concern played a critical role in the scrutiny and eventual demise of the project.