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

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

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

‘A Political Kill’

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

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

By spring 2021, Libra’s team had addressed every major regulatory concern, including issues related to financial crime, consumer protection, and reserve management.

A limited pilot rollout 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 Chair Jay Powell and Treasury Secretary Janet Yellen.

He alleged that Yellen advised Powell that supporting Libra would be “political suicide.” Shortly after, the Federal Reserve contacted banks involved in the project, warning them against moving forward. According to the former lead, this indirect pressure effectively ended the initiative.

He explained that the project wasn’t stopped for legal or regulatory reasons but was entirely a political decision enforced by pressuring dependent banking institutions.

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

Lessons and Broader Context

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

In the U.S., lawmakers were also skeptical, and Mark Zuckerberg was grilled 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 stablecoin regulation warned that combining a stablecoin issuer with a major commercial firm could lead to excessive economic power concentration.

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.

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