- Diem’s blockchain project suffered political interference.
- Federal Reserve warned banks on working with Diem project.
- Most tech founders has been unjustly targeted by Federal Reserve.
Former Meta boss David Marcus has claimed that United States Treasury Secretary Janet Yellen politically pressured Jerome Powell, the Federal Reserve chair, to “kill” Diem without any legal or regulatory basis.
The project aimed to transform digital payments at global levels, but it faced several hurdles that eventually led to its shutdown and subsequent sale to Silvergate Capital Corporation. Diem was to build a decentralized payment network with a US dollar-integrated stablecoin, a concept widely accepted and supported by financial powerhouses like Visa and PayPal.
Marcus David believed that Diem would have solved global payments at scale if given a chance. However, after giving up on Diem, Marcus left to serve as the CEO of Lightspark, a payment solution that relies on Bitcoin and a Bitcoin layer-2 lightning network.
The co-creator felt the need to open up after Marc Andreessen of Andreessen Horowitz discussed the industry’s enduring political pressure on The Joe Rogan Experience podcast. He maintains that building a money grid, as Diem intended, could only be successful if built on Bitcoin.
He said, “If you’re trying to build an open money grid for the world—eventually moving trillions of dollars a day, designed to be here 100 years from now—you must build it on the most neutral, decentralized, unassailable network and asset. And that is Bitcoin”
Diem made several adjustments to appease lawmakers in vain
Only two weeks after announcing the project’s launch, Marcus was invited to testify in front of the Senate Banking Committee and the House Financial Services Committee. The summon marked the beginning of the circus of adjustments and changes within the project to appease the lawmakers.
The adjustments worked well, as they addressed all regulatory concerns, from money laundering to consumer protection. With the project aligning with the regulations, Jerome Powell, the chairman of the Federal Reserve Board of Governors, was open to the idea. He would let the project move on in a “limited way.”
Janet Yellen was never comfortable with the idea, and she told Powell that giving the project a green light was a political suicide. Things became unbearable when the Federal Reserve allegedly told several banks that they were not comfortable with them participating in the Diem project.
The timing of Diem’s demise was questionable, whether it was a coincidence. Central Banks were keen on their own digital currency projects, as the Federal Reserve was exploring a US digital dollar. The competition between digital currencies and private stablecoins likely influenced the politics behind regulations.
Most industry leaders have experience with the Federal Reserve
The Marc Andreessen experience shared during the podcast triggered this conversation. During the show, he said that more than 30 tech founders have been debunked only over the past four years.
While responding to Marcus’s thread on X, Caitlin Long, CEO of Custodia Bank, claimed that her firm was also targeted. She said that one day, she would tell her story, mainly about what the Fed did to Custodia Bank. She added that there is so much corruption going on.
Some crypto founders, including Sam Kazemian, have alleged that JPMorgan Chase was instructed to close down accounts tied to crypto wealth. These controversies are vindicating Coinbase for raising concerns that the FDIC is discouraging banks from engaging with crypto firms.
