David Marcus who co-founded the Libra/Diem stablecoin project when at Meta (Facebook), recently published a post on X describing “How Libra was killed”. He wrote about the political moves to shut it down after venture capitalist Marc Andreessen discussed the de-banking of cryptocurrency firms on the Joe Rogan show last week.
When Libra was unveiled in June 2019, it was a very big deal, mainly because of Facebook’s involvement, but also since many of the 27 other brands were household names including Visa, Mastercard, PayPal and Stripe. Central banks around the world seemed to enter a state of collective panic.
It took less than four months for the major payment firms to drop out. Marcus revealed a letter to Visa sent by Senators Brian Schatz and Sherrod Brown just days before the card company’s withdrawal from the project. In it, the senators warn that “if you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities.”
Libra evolved into Diem and became more and more conservative, spending almost two years trying to get approval from Swiss regulator FINMA. It was willing to use a permissioned blockchain, dropped the idea of a stablecoin basket currency, and conceded to prevent usage of the stablecoin in DeFi. Eventually in May 2021 under the Diem brand it moved back to the US. Around the same time Federal Reserve Chair Jerome Powell spoke about stablecoins in a far more balanced manner, highlighting both the benefits and risks.
Marcus wrote, “At last, Chair Jay Powell was ready to let us move forward in a limited way. The story, as I heard it, is that Jay Powell was told by Treasury Secretary Janet Yellen at one of their biweekly meetings that allowing this project to move forward was “political suicide,” and she would not have his back if he let it happen. I wasn’t in the room when this conversation happened, so take these words with a grain of salt, but effectively this was the moment Libra was killed.”
He continued, “Shortly thereafter, the Fed organized calls with all the participating banks, and the Fed’s general counsel read a prepared statement to each of them, saying: “We can’t stop you from moving forward and launching, but we are not comfortable with you doing so.” And just like that, it was over.”
Marcus emphasized that there were no legal or regulatory angles remaining to block the project. “It was 100% a political kill – one that was executed through intimidation of captive banking institutions.”
We sensed it was all over from an August 2021 blog post by Marcus. While he hasn’t shared these specific details before, in 2022 he criticized how the decision was politicized.
Marcus subsequently launched LightSpark that uses the Bitcoin Lightning network for payments.
