Dante Disparte, Executive Vice President of the Diem Association spoke to Raoul Pal in an interview on Real Vision, which was released a short time ago.
Diem, is the re-branded Facebook project formerly known as ‘Libra’. The organisation is made up of 27 members, which include Facebook itself, and its digital wallet provider Novi. The other members are a selection of household names.
All members have voting rights and get to vote on matters that are presented by the “association council”. There is also an “independent operating council” that acts as the regulated overseer of the Diem payment system.
When asked by Pal why he thought there had been push back on the original proposed Libra global currency system, Disparte replied that he thought that the original proposition wasn’t properly understood and that its value wasn’t fully appreciated.
Disparte said that the choices of the original proposition remain the same:
“How do we build, leveraging technology, a model in which financial inclusion, financial integrity and responsible innovation are not seen as trade-offs, or dangerous to the status quo?”
Disparte went on to say that these questions haven’t been answered yet but that there had been a couple of break-throughs:
“The novelty is to take all of this and to reduce the cost of service and to reduce the cost of serving people such that anybody with a low-cost internet connected device could also have a compliant payment endpoint in their hands. That’s the breakthrough. The second breakthrough is the concept of interoperability, the fact that you no longer would have to have walled gardens in terms of how people are paying one another. I think that’s a very powerful ideal that would introduce a lot of healthy competition, and critically, optionality for how people are able to pay each other.”
When discussing the wait on regulatory approval, Disparte remarked that it was urgent, given the pandemic, that a bridge be built between digital payments, digital finance, and the real world. He said that they were working hard to get a payment system up-and-running in 2021.
Disparte talked about Diem designing a “very unique stablecoin”, that went much further than existing stablecoins, in that it would provide consumer protection, stability, security, and that Diem would commit to an open-source model that would allow entrepreneurs to innovate and build their own wallets and implementations.
Raoul Pal asked which were the properties that make the Diem stablecoin unique. Disparte replied:
“the Diem stablecoin is a stablecoin where people have price assurance in terms of a low volatility payment instrument, and that as a result, the liquidity and the reserves backing it are going through measures like the Basel III frameworks, which are typically applied to banking, and to lengths that no stablecoin to date has gone through.”
When asked how the Diem stablecoin might integrate with Bitcoin, Disparte replied that Bitcoin was “a very different economic instrument” and that unlike the cryptocurrency, Diem’s stablecoin was:
“designed through and through for payments, not speculation, and not holding balances”
Pal queried how Diem would manage the massive KYC requirements and Disparte, while admitting that it certainly was a huge challenge, responded:
“There’s a billion people in the world who have no state issued identification. As a result, they’re functionally invisible. We think one of the ways the Diem project and the advent of payment systems like ours is a difference maker is that if you lower the basic cost of financial inclusion and service, reduce it to nothing more than the internet connected mobile device, that it also creates a bit of an updraft for pulling people into the formal economy.”
He also added that given the prospect of e-health passports, there would be more of an appetite for ‘digital identity’.
Replying to how it would work with digital value being sent from a different system in one country to another through Diem, Disparte replied:
“the Diem blockchain and its protocol is designed to support a use case in which a Novi wallet user and a wallet user from a provider in another country, presumably a bank, or a technology, native platform, or others, [will] be able to exchange value to one another in a digitally native form that’s highly secure, that is compliant, that can happen in near real time at low cost.”
When asked who Diem would fit in with Central Bank Digital Currencies, Disparte responded that:
“The future is hybrid, it’s not one or the other, and I don’t frame this at all as a collision course between stablecoins and CBDCs or Bitcoin in any other asset in the sector actually, I think this is co-movement.”
Disparte was asked why Diem didn’t choose to run on the Ethereum Blockchain and he replied that the principal was:
“to really build something from the ground up that is designed for payments, designed for the openness, the interoperability, and disparate competition and regulatory clarity.”
Pal put the contentious issue of personal data to Disparte who remarked that Diem wouldn’t store a great deal of data on people and that a very high privacy standard that protects customers would be adhered to.
On how Diem would make revenue from their payments system, Disparte said that global, cross-border transactions were currently averaging 7%. He believed that Diem could do better than that and that there were a number of pathways that could be explored for revenue viability.
Finally, when asked when he thought Diem would launch, Disparte replied:
“It feels like Day 500, which is that we will launch when we have the appropriate regulatory framework in place and that remains an important principle to get it correct.”