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Silvergate Capital Corp. late Monday confirmed widespread reports that it has acquired assets from the stablecoin venture Diem Group. The deal, valued at $182 million in cash and stock, includes Diem’s intellectual property and “other technology assets related to running a blockchain-based payment network,” according to the announcement.
The La Jolla, Calif.-based bank, which has been working with Diem since the digital-currency venture moved to the United States last spring from its original headquarters in Switzerland, said it will use Diem’s technology to develop a dollar-based stablecoin it says its clients have been requesting. “Through conversations with our customers, 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,” said Allen Lane, chief executive of Silvergate, in a statement. “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.”
Silvergate’s technology includes a real-time payments service called Silvergate Exchange Network, which it intends to integrate with the Diem assets. “We have confidence in Silvergate’s ability to take Diem’s technology forward and transform the future of payments,” said Stuart Levey, chief executive of Diem Networks US, in a statement.
The deal includes payment of $50 million in cash and more than 1.2 million shares of Sivergate stock, valued at approximately $132 million at market close Jan. 31. The bank says it also expects to incur roughly $30 million in costs to integrate the Diem platform.
The Diem venture has the backing of some 26 corporations, including Meta Platforms Inc., formerly known as Facebook, which reportedly holds a roughly one-third stake. Other backers include major firms such as Coinbase, Shopify, Spotify, and Uber.
Facebook spearheaded the launch of Diem, then known as Libra, in 2019 and recruited a wide range of firms to help finance and run the venture, including big payments firms like Mastercard, PayPal, Stripe, and Visa. But many of these companies backed out in the face of widespread criticism from governments around the world that saw the private initiative as a potential threat to their own efforts to develop and establish digital versions of their sovereign currencies.
Payments-industry veteran David Marcus, who had headed up an effort at Meta to develop a digital wallet for Diem, left the company in December. Last week, reports emerged that the association was looking to dispose of its assets.
The latest move follows an agreement Diem struck with Silvergate last spring in which the bank agreed to issue a U.S. dollar stablecoin for the association, an about-face from Libra’s original mission to create a cryptocurrency tied to government securities and other assets. In May, the venture also announced it was relocating its headquarters to the United States from its original base in Geneva, Switzerland’s banking hub.
But by the turn of the year, it was apparent Diem had reached the end of the road. “Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators [in the United States] that the project could not move ahead,” Levey said in a statement. “As a result, the best path forward was to sell the Diem Group’s assets, as we have done today to Silvergate.”
