Silvergate had recently acquired intellectual property and other technology assets relevant to running a blockchain-based payment network from Diem, a failed Facebook-backed digital-asset project. This allowed it to invest even more in its platform and improve its stablecoin infrastructure. Silvergate Capital Corp. aims to leverage the technology it bought from Diem to power its stablecoin payment service later this year.
Former Diem Association members such as Facebook parent Meta Platforms Inc. and Uber Technologies Inc., are optimistic that the planned dollar-based cryptocurrency would eventually be used, according to Silvergate CEO Alan Lane. The new currency, however, will not be named Diem.
Former members of the association, which include Lyft Inc., Spotify Technology SA, and Coinbase Global Inc., do not have any arrangements with Silvergate.
Silvergate paid $132 million in stock for the assets, out of a total purchase price of $182 million. According to Lane, several of the former Diem members are now bank shareholders. Lane said other former members still maintain nodes on the blockchain network, but he wouldn’t name them.
Lane said that the La Jolla, California-based company is also considering forming a bank consortium to create and use the anticipated stablecoin.
Stablecoins are already being used or issued by several banks. USDF is a group of small community banks that backs a payment stablecoin. JPMorgan Chase & Co. settles customer transactions within the bank using its coin. But Silvergate’s massive consumer-focused firms like Facebook and Uber, which have millions of users, could drive widespread adoption.
Diem began in 2019 under a different name, Libra, intending to issue stablecoins backed by cash and securities. Under regulatory and legislative pressure, those objectives were toned back. The initiative never got off the ground, and David Marcus, the project’s founder, left Meta last year. Moreover, Christian Catalini, Diem’s co-founder and chief economist, has recently joined Chainlink as an advisor.
Additionally, the internet tech giant, Jack Dorsey had also addressed Diem’s failure at the recent Bitcoin for Corporations 2022 conference. Dorsey said that a lot was learned, but there was a lot of “wasted effort and time”.