How US Political Dynamics Led to the Downfall of Facebook’s Crypto Project

David Marcus, the former head of Facebook’s Libra blockchain project, recently shared how political opposition led to the downfall of the ambitious initiative.

In a detailed post on X, Marcus called the failure of the project “100% a political death,” pointing to actions by government officials that effectively stopped it.

‘A political slaughter’

Libra, later rebranded as Diem, was launched by Facebook in 2019. The platform was designed to be a fast, payments-focused blockchain combined with a stablecoin to solve global payment challenges. Before announcing the project, Marcus and his team spent months briefing regulators in the US and abroad.

However, just two weeks later, Marcus was called to testify before the Senate Banking Committee and the House Financial Services Committee. That began two years of efforts to address lawmakers’ concerns.

By spring 2021, the Libra team had addressed all major regulatory concerns, including issues related to financial crime, consumer protection and reserve management.

A limited pilot launch was planned, with some members of the Federal Reserve Board of Governors expressing support. However, according to Marcus, the project hit a critical roadblock during a biweekly meeting between Federal Reserve Chairman Jay Powell and Treasury Secretary Janet Yellen.

He alleged that Yellen advised Powell that backing Libra would be “political suicide.” Shortly thereafter, the Federal Reserve contacted the banks involved in the project, warning them not to proceed. According to the former leader, this indirect pressure effectively ended the initiative.

He explained that the project was not stopped for legal or regulatory reasons, but was a purely political decision that was implemented by putting pressure on the dependent banking entities.

For Marcus, the political nature of the project’s demise was the hardest part to accept. “America, this country I immigrated to…behaved this way for political reasons,” he wrote.

Lessons and wider context

Libra faced strong opposition globally, with financial leaders calling it a threat to national sovereignty. France’s Finance Minister Bruno Le Maire has openly criticized the idea of ​​private companies creating cryptocurrencies, insisting that monetary power should rest with governments.

In the United States, lawmakers were also skeptical, and Mark Zuckerberg was debated for six hours by Congress over the project at the time.

The broader regulatory environment also worked against the initiative. A November 2021 report on the regulation of stablecoins warned that combining a stablecoin issuer with a major trading company could lead to an excessive concentration of economic power.

Reflecting on the events, Marcus highlighted key lessons from the experience. He concluded that building a truly global financial system requires a neutral, decentralized network like Bitcoin, which he believes is better suited for long-term success.

After its collapse, many former team members joined other blockchain projects such as Aptos and Sui, which use technology developed for Libra. Marcus himself launched Lightspark, a startup focused on Bitcoin’s Lightning network.

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