The Facebook-led stablecoin consortium, the Diem Association has confirmed on Monday that it is selling its assets to Silvergate Bank, thus making an exit from the ambitious cryptocurrency project.
“Over the coming weeks, the Diem Association and its subsidiaries expect to begin the process of winding down, but we look forward to seeing the design choices, and the ideals, of Diem thrive,” said Stuart Levey, the CEO of Diem Network US.
Silvergate will purchase development, deployment and operations infrastructure, along with the tools for running a blockchain-based payment network that can facilitate payments for commerce and cross-border remittances. Additionally, the California bank will acquire proprietary software elements that are necessary to run a stablecoin network.
The official announcement details that Diem’s network is already in its pre-launch phase.
“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,” the CEO of Silvergate Bank, Alan Lane said.
For the acquisition, Silvergate has issued 1,221,217 shares of Class A common stock to Diem and paid an additional $50 million in cash, thus taking the total value of the consideration to almost $182 million.
A Controversial Project
Launched in mid-2019, Diem, then known as Libra , was initially planned for launch within a year. But, the project faced regulatory headwinds due to Facebook’s tainted reputation with data and concerns over the financial impact of a private currency.
The stablecoin project saw an exodus of its initial partners within months, and Facebook CEO, Mark Zuckerberg was forced to testify in front of the US Congress. To move away from all the controversy, the project even rebranded and changed the architecture of its stablecoin.
Silvergate Bank, which is known for its crypto-friendly policies, was already working with Diem. Earlier, both organizations tied for the launch of a USD-pegged stablecoin, but that did not receive a regulatory green light.
“In the United States, a senior regulator informed us that Diem was the best-designed stablecoin project the US Government had seen,” Diem’s Levey added. “Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead. As a result, the best path forward was to sell the Diem Group’s assets.”
