Facebook still faces problems before the launch of their Libra coin. Right after rebranding its Libra Foundation to The Diem Association, the company faces a lawsuit from a startup with an identical name.
At first, Facebook wanted to create Libra as a common digital currency such as Bitcoin (BTC), Ethereum (ETH) or Litecoin (LTC), but later the company changed its plan to a dollar-pegged stablecoin such as Tether (USDT). The company had to review its cryptocurrency ideas, as CoinIdol, a world blockchain news outlet previously reported.
After facing many challenges from regulators, Facebook thought that rebranding its cryptocurrency product would help it enter the market smoothly. However, it seems the new path is also a bumpy one.
In an attempt to distance the project from the initial format that has encountered a lot of regulatory concerns, Facebook’s Libra Foundation, revealed on December 1, 2020, that it was changing its names to The Diem Association, to help it roll out its own digital coin.
Now, a small startup with over 500,000 followers in the fintech industry with the same brand name has revealed that it will take Facebook to court for copying its name. The startup is doing this to protect its customers from getting confused while using its financial services. Once the customers get confused with the brand and services being offered, the startup will automatically register a significant impact on their growth. Diem is a small company compared to Facebook, but the former wants to fight for what is right using the courts of law to save and protect its brand.
Legal experts think what Facebook did was wrong or unwise. It would have first researched enough to see whether or not there is another Diem in the fintech sector offering financial services. Other experts including Chris Adelsbach, a fintech investor, believe being a giant company doesn’t mean you crush other small startups just like that.
Facebook has seen several operational setbacks and this has delayed the rollout of its coin. The company was also accused of trademark infringements by another fintech company called Current, over one of the logos it used by its subsidiary. Facebook’s Calibra logo looked almost similar to that of Current. Following that case, the Calibra’s logo was later changed.
Besides, the upcoming launch of the Libra coin still raises some concerns among governments and regulators. Last month, the German Finance Minister Olaf Scholz came out to say that relaunching Libra currency using its new name Diem is just cosmetic. The minister said that Europe won’t accept Facebook to just enter the market when the regulatory risks are still unaddressed. The rebranding will not help to address regulatory risks.
The minister proposes the currency monopoly to be by the state but not by the private sector. Facebook's actual plans concerning the development and release of Libra are not yet clear.
Up to now, the European Commission has not yet decided on the status of Libra, yet it was supposed to do this in March this year. Regulators and governments think that if they allow Libra cryptocurrency to enter the market, their fiat currency will lose or shrink in value. The illegal side of cryptocurrencies has contributed much to the rejection of Libra. Cryptocurrencies have been seen as a fuel that supports illegal activities such as money laundering, terrorism, sex, drug trading, and many others, so governments think that if they let Libra dominate the currency sphere, it will be hard for them to monitor and control such illicit operations.
Additionally, since the technology is still nascent, cryptocurrency is not yet secure. A lot of people have fallen victims of hacks due to weak cybersecurity and others have lost their funds in weird ways such as forgetting their wallet passwords, or the owner of cryptocurrency exchanges dying with the private keys of the exchanges. So, the regulators want these issues to be addressed and regulated first before allowing other giant digital currencies, besides Bitcoin, to enter the market.
Most governments are finding it wise to create their own digital currencies. Now, over 50 central banks are studying and researching about stablecoins and central bank digital currencies (CBDC). Countries like China, the USA, and others are soon launching their own state-backed CBDC to reduce Bitcoin hegemony. The fears concerned possible risks brought by the possibility of Libra to take away state financial monopoly.
What do you think, can Libra become a worthy competitor to government-backed CBDCs? Let us know in the comments below!