Silvergate Capital, an investment firm that is the parent company of Silvergate Bank, has acquired the technology and assets of Diem, the former Facebook-backed stablecoin payment system. The payment amounted to $182 million. The acquired technology and assets would be used for the launch of a Silvergate-branded stablecoin.
Silvergate acquires Diem Operations
Silvergate Capital, a payment services company, has acquired Diem, a stablecoin payment system originally set up by Facebook (now Meta), to integrate with its operations. The announcement was made on January 31, when the company explained the details of the supposed operation. The deal includes the purchase of intellectual property and other technology assets related to running a blockchain-based payment network from Diem Group, according to a press release.
Silvergate Capital aims to leverage the acquired assets to issue its own stablecoin, with the backing of a California-chartered bank and member of the Federal Reserve like Silvergate Bank, a subsidiary of the company. Regarding this, the company said:
We identified the need for a US dollar-backed stablecoin that is regulated and highly scalable to further enable them to move money without barriers. We still intend to satisfy this need by launching a stablecoin in 2022, using 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 goals in sight
Diem, which was originally called Libra, faced opposition from regulators worried about its original design. However, some believe that under the wing of a licensed banking institution, this view might change. This is the opinion of Alan Lane, CEO of Silvergate Capital. The executive said that this new stablecoin will be designed to meet different needs. Lan said:
We believe the potential value is off the charts when we think about using blockchain technology for payments and remittances.
Lane further explained that this stablecoin would be designed for “people to pay for things,” rather than for commercial 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, which can harm consumers and merchants who use it for payments.
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