Facebook’s former Diem project will go on to serve as the basis for a proprietary stablecoin payment service later this year, according to Silvergate Capital Corporation.
Earlier this week, Diem Association announced that it would dissolve and sell off the intellectual property and other assets related to Diem Payment Network to Silvergate Capital Corporation for $182 million.
Silvergate Capital’s Recent Acquisition
According to the company’s press release, Silvergate Capital paid $132 million out of the $182 million total purchase price in stock for Diem Payment Network’s assets, which included the issuance of 1,221,217 shares of Class A common stock and $50 million in cash.
Based in La Jolla, California, Silvergate first got involved with Diem in 2021, after agreeing to become the exclusive issuer of Diem’s stablecoin. Its Silvergate Exchange Network is best known for being one of the first traditional banks to embrace cryptocurrency, offering account holders 24/7 access to be able to transfer in real-time.
While Facebook initially had big plans for the project when it was announced as Libra in 2019, regulatory scrutiny forced it to retreat, rescope and rebrand, which resulted in Diem.
Silvergate CEO Alan Lane recently shared that the company is considering creating a consortium of banks that would eventually issue and use the planned stablecoin, but not under its current ‘Diem’ name.
“Through conversations with our customers, we identified a need for a U.S. dollar-backed stablecoin that is regulated and highly scalable to further enable them to move money without barriers. As previously stated on our Q4 2021 earnings call, it remains our intention to satisfy that need by launching a stablecoin in 2022, enabled by the assets we acquired today and our existing technology,” Lane said.
Does the stablecoin still have hope?
One of the biggest questions this recent acquisition still presents is whether stablecoins can actually succeed as a realistic method for financial transactions. Indeed, it appears that Silvergate’s decision to acquire Diem’s assets is a step forward in helping to shed light and clarity on this question.
Speaking to regulation, Lane emphasized that regulatory approval would determine much of the timing and the scope of the rollout.
“We certainly had conversations with them as we were negotiating purchasing the technology,” he said. Ultimately, he was not concerned about a lingering distrust on the part of regulators, having acquired Diem’s payment network, its stablecoin and intellectual property, but none of its employees. “We didn’t hire anybody from Facebook, anybody from Diem,” Lane noted. “We are a regulated financial institution running the payment network.”
Lane is hopeful that former members of the Diem Association will eventually use the prospective stablecoin, which will undergo a rebranding. While some former Diem members remain bank shareholders including Facebook parent Meta Platforms Inc. and Uber Technologies Inc., Silvergate says that it does not currently have any agreements with former association members including Lyft, Spotify Technology SA, and Coinbase Global Inc.
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