Diem: A Startup Case Study – A Payment Revolution That Ended

As global trade accelerates, the need for seamless, low-cost cross-border payments has never been greater. Yet, traditional international transfers still suffer delays—often taking 3 to 5 business days—due to legacy banking rails, compliance bottlenecks, and limited interoperability.

To address these challenges, one closed-loop, blockchain-based solution promised near-instant transfers and financial inclusion. Yet regulatory pushback and systemic resistance ultimately shut it down. Said startup?

Diem

Diem was a finance and insurance startup that aimed to revolutionize global payments by leveraging blockchain technology for low-cost and instantaneous transactions. Despite high ambitions and significant backing, the project ultimately faced regulatory hurdles and did not achieve a full public launch.

Status: Closed

Founding Year: 2019

Headquarters: Geneva, Switzerland

Industry: Fintech and Cryptocurrency

Business Model

B2B2C, Two-sided, Payment System

• Clients: Businesses, marketplaces, payment processors, and institutions that incorporate Diem’s payment rails to serve their customers.
• Suppliers: Technology providers, custodians, financial institutions holding reserves, and members of the Diem Association, comprising various industry players

It’s Like: BVNK but built for the unbanked and global payments.

Diem was designed as a closed-loop, blockchain-based payment system intended to facilitate fast, compliant, and low-cost global payments.

While its vision shares similarities with modern fintech platforms like BVNK, their approaches differ significantly:

• Diem focused on consumer-facing financial inclusion, especially for the unbanked. BVNK targets business clients.
• Diem was a closed, permissioned system with centralized control. BVNK enables decentralized access across multiple public blockchain networks.
• Diem planned a native, fully backed stablecoin (Diem USD). BVNK does not issue its own stablecoin but enables businesses to access and transfer regulated stablecoins, such as USDC or USDT, across multiple blockchains.

Global payment challenges

• Slow Settlement Times: Cross-border payments often take 3 to 5 days due to legacy banking infrastructure, cut-off times, and intermediary delays. This causes inefficiencies and disrupts cash flow for businesses.
• High Costs and Hidden Fees: Fees from correspondent banks, foreign exchange (FX) markups, and processing charges make international payments expensive and non-transparent. This decreases profitability and increases expense burdens.
• Regulatory Fragmentation: Varying compliance, licensing, and reporting requirements, as well as complex financial regulations, including anti-money laundering (AML) and know-your-customer (KYC) requirements across jurisdictions, hinder seamless international payment operations.
• Limited Access in Emerging Markets: Many regions lack reliable banking infrastructure or digital rails, making it difficult for the unbanked and underbanked to participate in global payments.
• Currency Volatility and Conversion Complexity: Frequent currency fluctuations and inconsistent FX rates create uncertainty and risk in cross-border transactions.
• The Blockchain Scalability Trilemma: Blockchain networks face a fundamental technical challenge balancing three key attributes: scalability (the ability to handle growing transaction volumes quickly), security (protecting the network from attacks and fraud), and decentralization (distributing control across many network participants).

Diem’s cutting-edge solution

• Instant Settlement: Diem enabled near-instant transfers by eliminating intermediaries and utilizing a high-speed permissioned blockchain.
• Low, Transparent Fees: Flat, transparent fees and no correspondent banks reduced costs and eliminated FX markups.
• Built-in Regulatory Compliance: Diem was designed for compliance, with built-in KYC/AML protocols tailored for global regulatory standards.
• Mobile-First Financial Access: Mobile-first infrastructure allowed unbanked users to transact without traditional banks, making Diem usable in underserved regions.
• Stablecoin-Based Transfers: Diem utilized fully backed stablecoins, Diem USD, to maintain price stability and simplify foreign exchange.
• Scalable, Secure Architecture: A permissioned network prioritizes speed and security, trading off decentralization for enhanced performance and compliance.

Founding Story

When and How Founded: The initiative that would become Diem began within Facebook (currently Meta) in 2017. The company was exploring how blockchain could reshape payments and financial services. By June 18, 2019, Facebook announced the project as Libra. To foster trust and allay regulatory concerns, Libra was to be governed independently by a consortium: the Libra Association, headquartered in Geneva, Switzerland. In December 2020, the project and the association were rebranded as Diem to mark its evolution and to reflect greater emphasis on compliance and regulatory clarity.

Problem Experienced: The founders aimed to address inefficiencies and high costs associated with the existing global financial system, particularly for cross-border payments and for the unbanked and underbanked population.

Founders and Their Experience:

• Morgan Beller: Started exploring cryptocurrency and blockchain initiatives within Facebook in 2017. She recruited Marcus and drove the initial strategy and partnership outreach.
• David Marcus: A French-born entrepreneur, he previously served as president of PayPal and later led Facebook Messenger. Marcus joined Facebook’s blockchain division in 2018 and played a key role in conceiving Diem. His expertise in payments (PayPal) and large-scale social applications (Messenger) made him uniquely suited to launch an ambitious, global digital currency, leading Facebook’s blockchain division.
• Kevin Weil: VP of Product at Novi (Diem’s digital wallet), oversaw the development of the user-facing application.

Why Able to Start: Facebook’s substantial resources and technological capabilities enabled the project’s initiation. Facebook’s reputation helped it to attract influential partners from multiple sectors, despite the project’s controversial nature.

Who Joined Them: The Libra Association was formed with 28 founding partners, including major players like Novi (Facebook/Meta subsidiary), Andreessen Horowitz, Mastercard, Visa, PayPal, and eBay. These partners collectively provided technology, payments, venture capital, non-governmental, e-commerce, and transportation experience.

How They Decided to Solve the Problem: Diem aimed to create a blockchain-based stablecoin payment system designed for low-cost, instantaneous global transactions.

Challenges:

• Intense regulatory scrutiny and pushback from governments and central banks worldwide.
• Concerns about monetary sovereignty, financial stability, and potential for illicit activities.
• Trust and privacy concerns due to Facebook’s involvement.

These led to the withdrawal of some partners such as Visa, MasterCard, PayPal, Stripe, and eBay.

First Results and growth: Diem did not achieve a full public launch due to regulatory hurdles and ultimately shut down.

Innovation/Technology for Success: Diem developed its blockchain, the Diem Blockchain, and a programming language called Move, designed for secure and reliable financial transactions.

Key Growth Milestones

• June 2019: Facebook announces Libra and forms the Libra Association with 28 founding partners.
• May 2020: Libra Association welcomes new members, including Temasek Holdings, Paradigm Operations, and Slow Ventures.
• December 2020: Rebranding from Libra to Diem, signaling a shift towards regulatory compliance.
• January 2022: Diem Association announces the sale of its assets to Silvergate Capital and initiates the wind-down process.

Market & Competition

Target Market

Diem’s target market consisted of two primary segments:

• Consumers: Diem aimed to attract a global user base, with a particular focus on the 1.4 billion unbanked and underbanked adults worldwide. These individuals often face high fees and limited access to traditional financial services, making Diem’s low-cost and accessible platform particularly appealing. Diem aimed to simplify cross-border transactions, remittances, and everyday payments for this demographic.
• Businesses: Diem targeted businesses as merchants and service providers, aiming to integrate its digital currency into various commercial ecosystems. By partnering with companies in multiple industries, Diem aimed to develop practical use cases for its currency and increase its acceptance among merchants, thereby driving adoption among their respective customer bases.

Market Growth:

The global digital payments market is experiencing substantial growth, driven by an increase in online transactions and a growing demand for efficient cross-border payment solutions. The market for application development software, including blockchain platforms like Diem’s, is projected to grow at a CAGR of 22.8% from 2025 to 2030. The global custom software development market, relevant to Diem’s blockchain development, is expected to grow at a CAGR of 22.6% within the same period. These market statistics indicate a ripe market for innovative fintech platforms like Diem to thrive.

Potential New Markets:

Diem had a global vision, mainly focused on the unbanked, underbanked, and global transactions. The project’s ambition to create a widely adopted global digital platform made it suitable for any market with a need for efficient and accessible financial services. This means the potential target market was broad.

Competitive Landscape

Diem operated in a highly competitive landscape, facing rivalry from both established players in the financial technology sector and emerging projects within the cryptocurrency space.

• Established Cryptocurrencies: Bitcoin and Ethereum presented competition, although Diem aimed to differentiate itself through its stablecoin model and initial permissioned blockchain approach.
• Other Stablecoins: The emergence of other stablecoins posed direct competition, although many lacked the backing of a major corporation such as Facebook (Meta).
• Traditional Payment Systems: Established financial institutions and payment processors with their existing infrastructure and customer bases presented formidable competition.
• Other Competitors include BVNK, BitPay, Litecoin Foundation, Bcause, ShapeShift, and Lykke. These entities represent a range of cryptocurrency-related businesses, including payment gateways, alternative cryptocurrencies, and exchange platforms.

Marketing & Sales

Main Positioning Values: Fast and low-cost transactions

Website & Socials

Diem’s official website was diem.com. Its social media handles have a considerable following, with Facebook (66k), X (61k),  Instagram (20.4k), and LinkedIn (10k) despite the program’s closure.

Media Coverage

• The New York Times and CNBC reported Diem’s founding.
• The Verge reported the withdrawal of some partners, such as Mercado Pago, Stripe, Visa, MasterCard, and eBay
• Potem Blog did a deep dive into Diem, covering its history and questions about its launch.
• CNBC reported on Diem’s launch plans.
• The Washington Post discussed the regulatory challenges that hindered the project from launching.
• Several media outlets, including Business Wire, The Wall Street Journal, Bloomberg, BBC, and CNET, reported on Diem’s winding down and asset sales to Silvergate Capital.

Marketing Strategies

• Customer Acquisition: Diem planned to leverage Facebook’s massive user base across its platforms (Facebook, Messenger, WhatsApp) by integrating the Novi digital wallet. This direct integration aimed to facilitate rapid user adoption and widespread use of Diem coins.
• Supplier Acquisition: Diem’s strategy involved establishing partnerships with businesses and organizations through the Diem Association membership. These collaborations aimed to create practical use cases for Diem’s currency, expanding its acceptance among merchants and service providers.
• Target Audience:
  • Unbanked and Underbanked Populations: With a focus on financial inclusion, Diem aimed to reach the estimated 1.4 billion adults globally who lack access to traditional banking services.
  • General Public Seeking Efficient Payment Solutions: Diem also targeted individuals seeking more convenient and potentially lower-cost alternatives to traditional payment methods for everyday transactions, particularly for cross-border transfers.
• Marketing Methods: 
  • Content Marketing: Publishing whitepapers, blog posts, FAQs, and technical documentation to educate potential users and developers.
  • Partnerships and Collaborations: Leveraging relationships within the Diem Association to promote adoption and create use cases.
  • Public Relations: Engaging with media outlets to communicate Diem’s vision and address public concerns.

Product & Innovation

Permissioned Blockchain

Diem was based on a purpose-built, highly scalable blockchain. Designed for thousands of transactions per second, secured via a Byzantine Fault Tolerant (BFT) consensus mechanism. Only pre-approved validator nodes (starting with Association members) could participate, balancing decentralization and regulatory oversight.

Multi-currency Stablecoins

The project planned to issue stablecoins pegged 1:1 to fiat reserves such as the USD, EUR, and GBP, backed by cash and government securities held with regulated custodians. This model was designed to ensure value stability and regulatory trust.

Move Programming Language

Diem introduced its own smart contract language, Move, purpose-built for security and flexibility in digital asset management.

Compliance and AML/KYC Infrastructure

Diem built compliance mechanisms (e.g., AML, KYC) into the network architecture, working closely with regulators to address concerns about privacy, money laundering, and systemic risk.

Association Governance

Policy and key decisions were made through the Diem Association Council, ensuring a wide variety of interests and at least a two-thirds majority for major changes, rather than Facebook having unilateral control.

Financials & Metrics

Funding and Investments

Diem secured significant funding throughout its development. Facebook, along with other founding members of the Libra Association, reportedly invested $10 million each in the initial investment. In May 2020, the Diem Association welcomed new members, including Slow Ventures, Temasek Holdings, and Paradigm Operations. The exact investment amounts from these later investors were not specified. When the Diem Association decided to wind down the project, its assets were acquired by Silvergate Capital Corporation for a reported $182 million.

Employee Count

Diem Association’s LinkedIn page reports between 15 to 50 employees. In the early days, over 50 Facebook engineers worked actively on the project.

Structure & Culture

Structure

• Diem Association: Governed the Diem network and managed the reserve. Comprised of various businesses and non-profit organizations, including Novi (Facebook/Meta subsidiary), Uber, Lyft, Coinbase, PayU, Farfetch, Anchorage, Bison Trails, and Xapo.
• Key Personnel:
  • David Marcus: Head of Facebook’s blockchain division and Diem project lead.
  • Stuart Levey: Chief Executive Officer of the Diem Association.
  • Dahlia Malkhi: Chief Technology Officer
  • Steve Bunnell: Chief Legal Officer

Culture

• Emphasis on Regulatory Compliance: Diem actively engaged with regulators and made strategic decisions, such as the rebranding and shift to single-currency stablecoins, to address regulatory concerns.
• Focus on Technological Innovation: Diem developed its own blockchain and programming language, demonstrating a commitment to building a robust and secure platform.
• Financial Inclusion: Diem aimed to provide financial services to the unbanked and underbanked population, suggesting a potential value for social impact.

Anticipated Impact

Diem aimed to provide financial services to the unbanked and underbanked populations worldwide. The project’s goal was to enable low-cost and instantaneous money transfers across borders. However, due to regulatory challenges, Diem was unable to realize its intended impact fully and was ultimately shut down.

Growth & Future

Challenges and Risks

• Regulatory Hurdles: Diem faced significant regulatory pushback, ultimately leading to its closure. This highlights the challenge of navigating complex and evolving regulations in the cryptocurrency space.
• Public Trust and Privacy Concerns: Association with Facebook led to concerns about data privacy and security, impacting public and regulatory trust.

Future Plans

Diem, as an entity, ceased to exist after the sale of its assets to Silvergate Capital in early 2022; thus, no plans.

Wind Down and Liquidation

After Diem sold its assets to Silvergate Capital, many believed the stablecoin would finally come to life. But Silvergate, caught in its own storm of financial and regulatory troubles, couldn’t get the project off the ground. The collapse of the Diem payment initiative and Silvergate’s eventual liquidation stemmed from a narrow focus on crypto clients, mounting regulatory pressure, and the broader crypto market crash of 2022.

As giants like FTX crumbled, Silvergate faced a staggering $8 billion in withdrawals within a single quarter—crippling its liquidity and forcing it to sell assets at a loss. The bank’s strategy, built around servicing crypto exchanges and firms, backfired in the face of extreme volatility and customer panic. U.S. regulatory probes into Silvergate’s connections with distressed crypto entities intensified compliance burdens, prompting major clients like Coinbase to walk away. With these pressures mounting, Silvergate opted for an orderly wind-down, effectively ending any chance of Diem’s revival under its leadership.

Key Takeaways for Entrepreneurs

• Address Real Barriers: Diem aimed to serve the 1.4 billion unbanked and underbanked globally by leveraging mobile-first, low-cost digital payments. This is a reminder for you to design products with accessibility and affordability tailored to underserved populations; it can open vast markets for you.
• Innovate with Compliance in Mind: Diem’s downfall underscores the importance of aligning innovation with regulatory expectations, especially when operating globally. Different rules across jurisdictions (KYC, AML, licensing) stifled Diem’s global ambitions. SMBs planning cross-border expansion should prioritize legal adaptability and local compliance strategies because, no matter how disruptive your idea is, government regulations can impact your success.
• Big Names Don’t Guarantee Success: Despite Facebook’s backing, Diem failed. Facebook’s involvement gave Diem scale and initial trust, but also triggered privacy and monopoly concerns, leading to distrust by regulators and users. Partnering with or being part of large firms delivers resources but invites extra scrutiny.
• Reduce Costs and Boost Speed: By eliminating intermediaries, Diem showcased how blockchain in financial services can cut transaction costs and settlement times. Which intermediaries do you need to cut out so you can reduce costs and boost speed?
• Building a Consortium Can Enhance Credibility but Adds Complexity: Diem formed the Diem Association with 28 founding members from diverse sectors to govern development and operations. Collaborations bring expertise and legitimacy but also require managing multiple stakeholders and their often-divergent interests.
• Political Factors Can Override Regulatory and Technical Merits: Diem’s ultimate failure was shaped more by political opposition than technical shortcomings. Entrepreneurs should anticipate how political perceptions and influence can affect their projects, especially when large incumbents or trusted public entities oppose disruption.
• Digital Payment Innovation Is Still Ripe for Disruption: Even though Diem shut down, the problems it tried to solve—slow cross-border payments, high fees, and financial exclusion—still exist. There’s room for new players to step in with more adaptive models.