Diem Moves Away from Switzerland, Partners With Silvergate
- The Diem Association has withdrawn its application for a payment system license in Switzerland, and will now register as a money services business with FinCEN.
- The association has also partnered with crypto friendly bank Silvergate, which will issue the Diem USD stablecoin and manage its reserves.
David Marcus, Head, Diem, Facebook, speaking at the Creating a Credible and Trusted Digital Currency session at the World Economic Forum Annual Meeting 2020 in Davos-Klosters, Switzerland, 23 January. World Economic Forum/Faruk Pinjo
The Diem Association is moving its operations away from Switzerland, and has formed a partnership with Silvergate Bank to issue a dollar-pegged stablecoin, Diem announced on 12 May.
According to the press release, the association has already withdrawn its application for a payment system license from the Swiss Financial Markets Authority (FINMA).
The Diem Payments Network — a blockchain-based payment system facilitating Diem transactions — will now be managed by Diem Network US. The U.S. subsidiary of Diem will also register as a money services business with the Financial Crimes Enforcement Network (FinCEN). The CEO of Diem, Stuart Levey, explained in a statement:
“While our plans take the project fully within the US regulatory perimeter and no longer require a license from FINMA, the project has benefited greatly from the intensive licensing process in Switzerland and the constructive feedback from FINMA.”
Diem Network US has also partnered with crypto-friendly bank Silvergate, which will be the formal issuer of the Diem USD stablecoin, and will also manage the reserve backing the new digital asset. While the press release did not specify where the new Diem headquarters will be, CNBC reported it will be in Washington, D.C..
Last month, CNBC reported that Diem was planning to conduct a small-scale pilot using a U.S. dollar-pegged stablecoin sometime in 2021. Back in February, the association also partnered with Fireblocks and First Digital Assets, who agreed to provide a secure wallet and infrastructure for financial institutions to connect to the Diem network.
The Facebook-backed project, formerly known as Libra, was first revealed in 2019. It had the goal of launching a single stablecoin tied to a basket of different fiat currencies, but pressure from regulators forced the project to scale-down its plans and focus on developing a number of stablecoins pegged to different national currencies.
- 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”.
Shutterstock
- The two companies will create compliance solutions for Diem’s Financial Intelligence Function (FIF).
- FIF will protect the upcoming Diem Payment Network (DPM) and its participants from illicit financial activity.
- While there was no confirmed date for the launch of the pilot, sources have said it will involve a single stablecoin tied to the U.S. dollar.
- The pilot is expected to be a small-scale one, mainly focusing on payments between individual consumers.