Silvergate Bank rescues Diem, also known as Facebook Coin, by purchasing the assets of the failed project.
Diem’s debut was earlier thought to be contingent on receiving regulatory permission in the United States by Facebook founder Mark Zuckerberg. In a news release issued on Monday, Diem CEO Stuart Levey claimed that officials had turned down the proposal.
“it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead.”
Silvergate, who was previously a partner in the Diem project, would acquire intellectual property and other technical assets as part of the $200 million agreement.
What are Silvergate’s Plans for Diem
Since its inception, Facebook Coin has struggled to persuade the general public of its benefits. The key area of discussion was how to strengthen Facebook’s already significant clout.
Despite the fact that Facebook went to great lengths to distance itself from the project, primarily through an organizational structure of 100 founding members who each have an equal say in decisions, this wasn’t enough to persuade people of its goals to promote greater financial inclusion and user safety.
According to Levey, a top regulator remarked the Diem Payment Network was the best-designed stablecoin project he’d seen. Despite this, authorities eventually pulled the plug for reasons Levey could not expand on.
Diem’s only alternative was to shut down operations and sell the project’s assets in the hopes of salvaging what was left.
“As a result, the best path forward was to sell the Diem Group’s assets, as we have done today to Silvergate.”
Can Silvergate Make the Diem Dream Come True?
Silvergate CEO Alan Lane told CNBC that he intends to establish a stablecoin by the end of the year using Diem’s assets and intellectual property.
Silvergate “knew the team extremely well” after working closely with Diem, according to Lane. He aims to go on from where Diem left off by launching their own stablecoin.
“We were working last year with Diem and we got to know the team very well, and we couldn’t be more excited to, essentially, be taking the reigns and bringing a stablecoin to market hopefully later this year.”
Legislators in the United States have recently been more interested in stablecoins. On February 8, a virtual hearing titled “Digital Assets and the Future of Finance: The President’s Working Group on Financial Markets’ Report on Stablecoins” will take place.
Participants are anticipated to continue discussing risk mitigation in order to develop a regulatory framework.