Silvergate is buying assets of Zuckerberg’s crypto venture

abdelaziz Fathi

Crypto-friendly bank Silvergate Capital today announced it was buying the assets of the Diem Association, which runs the Facebook-backed cryptocurrency venture for $182 million.

Facebook

The assets acquired by the US-listed bank include infrastructure and tools of development and operations related to running the blockchain-based payment network. To fund the deal, Silvergate issued more than 1.22 million common shares to Diem Association, which is funded by Facebook but operates independently, plus $50 million in cash.

As part of integrating the acquired assets into Silvergate’s existing technology, the local three-branch lender expects to incur approximately $30 million of additional costs in 2022.

Alan Lane, Chief Executive Officer of Silvergate, comments: “In the digital asset industry, money moves across the globe around the clock. 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.”

“I’m tremendously proud of the efforts of our members, partners and teams who have worked tirelessly to develop the Diem Payment Network with robust controls to protect consumers and combat financial crime. We have confidence in Silvergate’s ability to take Diem’s technology forward and transform the future of payments,” added Diem chief executive Stuart Levey.

This is not the first interaction between Diem and the crypto-focused, California-based bank. Earlier in May, Silvergate teamed up with Zuckerberg’s crypto project in a partnership that assigned the crypto friendly lender as the exclusive issuer of the social media giant’s stablecoin, aka Diem USD. Formerly known as Libra project, the Diem should have been the first cryptocurrency issued on Facebook’s payment system, which has been in limbo since 2019.

Head of Facebook’s crypto unit Novi quits

Silvergate, which is trading under the ticker (NYSE: $SI), allows its customers to obtain US dollar loans collateralized by their bitcoin holdings at some crypto exchanges that Silvergate is currently serving.

In the absence of major institutional attention, Silvergate Bank provides tailored financial services to businesses that are directly or indirectly dealing with cryptocurrency and blockchain-related services.

David Marcus, the former head of Facebook’s crypto unit Novi and its efforts to launch a digital currency, left the company in December.

Other than Zuckerberg himself, Marcus had been the face of Facebook’s wallet and its long-delayed stablecoin since the company announced the two projects in 2019. Since then, he led efforts to spur support for Facebook’s cryptocurrency endeavors through introducing tremendous changes. Libra cryptocurrency rebranded as Diem, while Calibra wallet has become Novi.

Marcus has recently stated that Facebook was getting closer to launching its Novi wallet, a move that would expose 2.9 billion users to digital currencies, possibly for the first time. It would then compete in a market dominated by the likes of Coinbase and Gemini, which operate crypto wallets for their traders.

Facebook Inc. and its partners were redesigning the proposed cryptocurrency to ensure that diem is not being built to compete with sovereign currencies or interfere with monetary policy. The changes were apparently an effort to woo reluctant global regulators and rebuild momentum for the plan.

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