Silvergate Bank To Issue Facebook-Backed Diem’s Stablecoin

Silvergate Bank To Issue Diem’s Stablecoin

The Diem Association, a nonprofit with strong ties to Facebook, has moved its main operations to the United States from Switzerland, according to a press release.

Diem, which grew from Facebook’s controversial Libra digital currency effort and is run by 26 members, also said in the release that a wholly owned subsidiary, Diem Networks U.S., and Silvergate Capital Corp., have entered into an arrangement through which Silvergate Bank will exclusively issue the Diem U.S. dollar-denominated stablecoin.

Stablecoins are cryptocoins whose value is pegged to an asset other than the coin itself, often a fiat currency such as the U.S. dollar whose value remains relatively constant, or an asset such as gold.

Diem Networks U.S. will run the Diem Payment Network, according to the release. The network handles the transfer of Diem stablecoins.

“Silvergate is a leader in financial innovation and an ideal partner for Diem as we move forward with a blockchain-based payment system that protects consumers and enhances the integrity of the financial system,” said Diem CEO Stuart Levey in the release. “We are committed to a payment system that is safe for consumers and businesses, makes payments faster and cheaper, and takes advantage of blockchain technology to bring the benefits of the financial system to more people around the world.”

Silvergate CEO Alan Lane said in the release: “We believe in the future of U.S. dollar-backed stablecoins and their potential to transform existing payment systems. We’re inspired by Diem’s technology and commitment to building a regulatory compliant payment system that offers a safe and secure way to move money.”

Diem didn’t say in the release when it would issue its U.S. stablecoin, although it was reported in April that a coin could come as early as this year.

The association said in the release that it is moving operations to the U.S. from Switzerland as part of “simplifying its plans for the Diem USD stablecoin issuance.” The move is appropriate because of the “evolving digital currency regulatory environment” in the United States.

At the same, Diem is pulling an application to run a payment system license in Switzerland because it won’t need one, according to the release. Diem will register in the U.S. as a money services business.