Silvergate Capital, an investment firm that is the parent company of the Silvergate Bank, acquired the technology and assets of Diem, the formerly Facebook-backed stablecoin payment system. The payment totaled $182 million. The technology and assets acquired will reportedly be used for the launch of a Silvergate branded stablecoin.
Silvergate Purchases Diem Operations
Silvergate Capital, a payments services company, has acquired Diem, a stablecoin payments system originally put in motion by Facebook (now Meta), to integrate it into its operations. The announcement was made on January 31st, when the company explained the details of the rumored operation. The deal includes the purchase of intellectual property and other technology assets related to running a blockchain-based payment network from the Diem Group, according to a press release.
Silvergate Capital aims to leverage the acquired assets to issue a stablecoin of its own, with the support of a California-chartered and Federal Reserve member bank like the Silvergate Bank, a subsidiary of the company. On this, the company stated:
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. 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.
The acquisition, which valued Diem at $182 million, included the issuance of 1,221,217 shares of Class A common stock and $50 million in cash.
New Objectives in Sight
Diem, which was originally called Libra, faced opposition from regulators worried about its original conception. However, some think that under the wing of a licensed banking institution, this vision might change. This is the opinion of Alan Lane, CEO of Silvergate Capital. The executive declared that this new stablecoin would be designed to satisfy different needs. Lane stated:
We think the potential worth is off the charts when we think about using the blockchain technology for payments and remittance.
Lane further explained that this stablecoin would be designed for “folks to pay for things,” instead of for trading purposes. Currently, Silvergate has an operation called the Silvergate Exchange Network, where stablecoin issuers can create and redeem their own stablecoins. The executive compared this use case with the original idea of bitcoin, but without the volatility characteristic of the first crypto asset, that can hurt consumers and merchants using it for payments.