Diem Confirms It’s Shutting Down, Sells Assets to Silvergate
- Previously known as Libra, Meta’s Diem project has finally given up the fight with regulators, which has existed since it was founded in 2019.
- Silvergate will be acquiring Diem’s intellectual property for $182 million, and then use it to launch a “next-generation global payment system”.
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Meta’s stablecoin project Diem is officially shutting down, and will be selling its intellectual property and other assets to the Silvergate Capital Corporation, Diem said in a press release on 31 January.
According to the announcement, in the coming weeks the Diem Association and its subsidiaries will start winding down operations, and begin selling its intellectual property — such as tools for development, deployment, operations, and running a blockchane-based network for remittances — to Silvergate. The CEO of Diem Networks, Stuart Levey, said in a statement:
“We remain confident in the potential for a stablecoin operating on a blockchain designed like Diem’s to deliver the benefits that motivated the Diem Association from the beginning. With today’s sale, Silvergate will be well-placed to take this vision forward.”
In a separate press release, Silvergate revealed it will be acquiring Diem’s assets for the aggregate value of $182 million, $132 million in Class A common shares and an additional $50 million in cash. Its subsidiary, Silvergate Bank, will then integrate its payment platform, the Silvergate Exchange Network, with Diem’s assets and launch a “next-generation global payment system”. The CEO of Silvergate, Alan Lane, said in a statement:
“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. As previously stated on our Q4 2021 earnings call, 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.”
Diem, previously known as Libra, was introduced to the world by Meta back in 2019 as a project that wanted to create a stablecoin tied to a basket of fiat currencies. The project immediately met resistance from regulators, and even received an open letter from U.S. lawmakers requesting its development is paused.
Despite the hurdles, Meta continued its efforts in developing the project, which in 2020 was rebranded to Diem. Back in December 2021, Meta even began limited trials of its Novi digital wallet — which was supposed to support the Diem stablecoin — on its messaging platform WhatsApp. Levey said in Monday’s press release:
“In the United States, a senior regulator informed us that Diem was the best-designed stablecoin project the US Government had seen.”
- Sui Network was developed by Mysten Labs, which was founded by ex-Meta employees, using the Rust-based Move programming language.
- Unlike other blockchains that use proof-of-work and proof-of-stake consensus mechanisms, Sui relies on delegated proof-of-stake that allows users to elect and vote for delegates.
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- Silvergate Bank made the decision to shutter its operations and liquidate its assets due to “recent industry and regulatory developments.
- The company plans to fully repay all deposits, and preserve the “residual value of its assets”, including proprietary technology and tax assets.
- Silvergate noted that a “transformational shift” in the crypto space left it with a $1.05 billion net loss for Q4 2022, and a $4,7 billion reduction in deposits compared to Q3.
- The company is now taking action to prepare for a “sustained period of lower deposits”, such as managing its expense base and evaluating its portfolio.