Christian Catalini, the projected digital stablecoin Diem’s chief economist, stated that the Diem would be phased out as soon as a Federal Reserve-issued central bank digital currency (CBDC) became available.

The Diem, formerly the Libra, is a group of 26 financial firms working on launching a stable coin tied to the dollar later this year. It is based on blockchain technology and seeks to make money transfer instantaneous, open, and low-cost.

Its predecessor, the Facebook-backed Libra, was met with significant criticism from policymakers, who thought it would take over control of the monetary system and, given Facebook‘s track record in certain areas, endangers user privacy.

As a result, to gain regulatory approval, the project has been rebranded and is now handled by a group of companies rather than Facebook. One such them is Facebook’s digital wallet Novi.

“Diem has committed to fading out, for example, Diem dollar, if there were such a thing as a digital dollar issued by the Fed,” 

Said Christian Catalini, 

“The public sector has a large comparative advantage in developing anything that has to do with stability, money, value preservation and macroprudential policy. We don’t want to change that. In fact, we want to build on and take advantage of that infrastructure to accelerate use cases for consumers both domestically and also globally.” 

To make its digital stablecoin more acceptable, the Diem organization has focused on privacy and competitiveness. Here’s how Catalini explains his reasoning:

“This is a technology that is innovating on the privacy landscape when it comes to selective disclosure and what you can really do with it,” And “Diem is going to be privacy by design, and we also want to encourage privacy as a dimension of competition on the network.” 

Catalini commented on the idea of connecting Diem with DeFi:

“There’s a lot of innovation in that space,” he said. “But at the same time, when you tag on DeFi on top of a stablecoin, what you are essentially doing is reintroducing leverage into a system that is meant to be one-to-one backed. And that’s something that we don’t want on the Diem ecosystem.” 

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