Mediobanca mad about Facebook’s Diem

Mediobanca mad about Facebook’s Diem

by Chiara Rossi
Who was there and what was said at the Mediobanca seminar “Carpe diem: the next big thing in digital currency” in which no praise was spared to the Diem digital currency project launched by Facebook

Facebook wanted to revolutionize finance with a global digital currency, Libra, then regulators arrived. But the behemoth founded by Mark Zuckerberg is ready to partner with central banks in the field of cryptocurrencies with its digital currency project, now named Diem.
This is the message launched by Cristian Catalini, chief economist of Diem (formerly Libra), the Facebook digital currency program, speaking yesterday at the first RegEvent (Regulatory Event) organized by Mediobanca, “Carpe diem: the next big thing in digital currency” , in which virtually over 400 investors participated. This is a series of events dedicated to macro-trends that are impacting global markets.
Interviewed by Andrea Filtri, Mediobanca’s co-head of equity research and expert in digital currencies, Catalini defined the collaboration with central banks on the subject of digital currencies as a real “promise”, offering Diem’s technology to implement a lot faster central bank digital currencies (so-called CBDCs) such as the digital euro. This would help quickly bridge the temporary and technological gap of Western central banks with China, the first major country ready to issue central bank public currency.

The People’s Bank of China has in fact gone ahead with tests of its digital yuan in various cities.
Cryptocurrencies have been the subject of discussion on Wall Street lately thanks to a wild rally in bitcoin and other digital currencies followed by a new slump due mainly to the squeeze of China, which has decided to hinder both digital coin mining and trading.
“Certainly there are crypto assets out there today that represent a much more serious challenge to central banks but, I repeat, we really want to cooperate with central banks to identify ways in which we can bring the benefits of this interoperable and programmable network. to traditional payments. This is our mission and we will be very transparent and willing to change the design of our network to achieve this ”, underlined Cristian Catalini, chief economist of Diem (formerly Libra), Facebook’s digital currency program.
A reassuring message that represents a turning point for the American giant whose digital currency project, initially named Libra and then changed to Diem, seemed to represent an open challenge to the central banking system and to the monopoly of monetary policy.
First proposed in June 2019 under the name libra, the token was initially intended to be a universal currency linked to a basket of sovereign currencies such as the US dollar and the euro.
But the digital currency promptly sparked fears from central bankers and politicians worried that it could undermine sovereign currencies such as the dollar, allow money laundering, and violate user privacy.
The Libra organization has since lost several key supporters, including Visa, Mastercard and PayPal.
After much regulatory opposition, the group, now named Diem, has therefore shifted its focus to multiple “stablecoins” backed by different currencies, as well as a multi-currency coin.
For now, Diem is only planning to issue a US dollar-backed stablecoin, called Diem Usd. Unlike bitcoin, which uses a public accounting system and is not controlled by any single authority, Diem’s technology will only be open to a few participants, such as Facebook and other members of the Diem Association.
Stablecoins are also designed to avoid the price volatility seen in cryptocurrencies such as bitcoin.
“The project you see today is totally different from the one we started from,” Catalini pointed out. “When we published our first white paper, we knew those ideas needed a lot of work to develop. The first dimension in which we were lacking in the first version of the White paper was the issue of compliance and a framework for the use of digital currencies that was compatible with the way the payment system has developed in recent decades “.
A concept that Catalini explained by underlining how “the onboarding processes to our network today are similar to those any bank would do for the acquisition of a new customer” and pointing out that the current chief compliance officer of Diem was employed in previously the same position for a large bank. “The first major issue was that of compliance and today the system (Diem) resembles that of traditional payment systems” , summarized Catalini.
Interviewed by Andrea Filtri, co-head of equity research at Piazzetta Cuccia and expert in digital currencies, Catalini then offered Diem’s technology to implement central bank digital currencies, such as the digital euro, much faster. This would help quickly bridge the time and technology gap of Western central banks with China, the first major country ready to issue central bank public currency.
“We all know that China is way ahead on the central bank digital currency project,” Catalini pointed out.


Catalini then ruled out that a Diem success could destabilize the financial sector: “If you look at the way in which we are integrating with banks, you will see that we are trying to build starting from the existing system, so Diem is not a network that will impact on how money is created and how central banks can do their monetary policy ”.
However, some in the cryptocurrency sector think that digital innovation around currencies would be best left to the private sector.
Governments can help set the rules of the road and make sure monetary policy is adhered to and financial crimes are averted. But the government shouldn’t be concerned with building technologies, ”Jeremy Allaire, CEO of the cryptocurrency company Circle, told CNBC.
Diem’s technology has “radically changed in the last year and a half from a naive blockchain to a very sophisticated blockchain that is trying to answer some of the questions that regulators had,” Ran Goldi, CEO of First Digital, told CNBC. Assets Group, which is building infrastructure to allow merchants to accept diem as a payment method.
Finally, in commenting on Facebook’s “institutional turning point”, Il Sole 24 Ore reports, “Filtri writes in a report that” after the Libra project controversy, the way for Diem to take off was to abandon the issue of competing stable coins of fiat currencies and transacting with Western central banks – clearly starting with the Fed – by offering their technology to allow them to bridge the gap with China and quickly launch their central bank digital currencies. In return, Diem would establish itself as the new global standard, offering economic and cross-border payments to billions of people, leveraging Facebook’s reach of 3 billion people »”.