Facebook's Diem Announces Silvergate Partnership, Will Move Operation Back To US

Diem Association, a group backed by Facebook, has disclosed its intentions to move operations from Switzerland to the United States. The group, which has been trying to secure a payment system license with Swiss bank watchdog, FINMA, said it has abandoned that plan and withdrawn its application. Diem has now set up a U.S unit.

Diem Partners with Silvergate Bank

In an official blog post detailing its relocation plan, Diem also announced a new strategic partnership with Silvergate Bank. According to the group, moving its operations to the US is an integral part of its plan to issue the Diem USD stablecoin. By bringing the project into the US regulatory perimeter, Diem will run its blockchain-based payment system from the country easily. The partnership with the crypto-friendly bank Silvergate to launch the US dollar-pegged stablecoin would be run by Diem Networks US. Silvergate will become the exclusive issuer of the Diem USD stablecoin and manage the Diem USD reserve. Diem Networks will be registered as a money services business with the Financial Crimes Enforcement Network (FinCEN). It would also be in charge of the Diem Payments Network (DPN). The DPN is a permissioned blockchain-based payment system that would facilitate the real-time transfer of Diem stablecoins among approved network participants. Speaking on the partnership with Silvergate, Stuart Levey, chief executive officer of Diem, expressed optimism about the collaboration and how it would take the blockchain-based payment system to the next level. Levey said,

“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. We look forward to working with Silvergate to realize this shared vision.”

Alan Lane, chief executive officer of Silvergate, also commented that the bank is excited and inspired by Diem’s technology and commitment to building a regulatory compliant payment system.

The Rebranded Diem Moving Forward

The Diem Association was formerly known as Libra Association when it was first announced in June 2019. It had several backers, including Facebook, VISA, Mastercard, and PayPal. A string of regulatory backlash saw an exodus of members some few months after its announcement. Global central banks, government officials, and stakeholders were worried that Libra could undermine sovereign currencies like the dollar, enable money laundering and infringe on users’ privacy. The organization has since rebranded to Diem. Diem has 26 members, including merchants, payment service providers, social impact partners, and other entities.