The Facebook-affiliated Diem stablecoin is shifting its primary operations from Switzerland to the U.S., a move that includes a deal with a regulated American bank and a withdrawal of the project's application for a Swiss payment license.
Silvergate Bank, a unit of the $7.8 billion-asset Silvergate Capital, is chartered in California and a member of the Federal Reserve. Diem Networks US will register as a money-services business with the Department of the Treasury's Financial Crimes Enforcement Network. Diem said the move makes the Swiss license unnecessary.
Silvergate, which is based in La Jolla, California, is a proponent of decentralized finance, or a method of product development that uses distributed ledgers and smart contracts, which are also used to support crypto and stablecoins. Diem did not immediately return a request for comment, but in a release called Silvergate an "ideal partner" for a blockchain-based payment system. Diem did not announce a time frame for the stablecoin's launch, which is expected this year.
In the two years since Libra's original white paper, the digital currency market has changed dramatically. Dozens of mainstream financial services companies have invested in cryptocurrency and stablecoins, including many of Libra's original members such as Mastercard and Visa. Central bank digital currencies have also gained momentum, as have private-sector stablecoins such as Circle's USDC coin, which has expanded rapidly in the past year. Circle also added Dante Disparte, the former vice president of the Diem Association, to drive Circle's global expansion.
Regulations have been a major obstacle in Diem's story from the start, when it was called Libra.
Libra faced nearly constant political and regulatory pushback, partly because of concerns that its power would impact central bank control over currency policy and partly because of Facebook's overall penchant for controversy.
Libra changed its model to assuage regulatory concerns, switching from a range of traditional currencies to back its stablecoin, then changing its brand to Diem — partly to distance the project from Facebook.
The project also lost several key early partners, though it has recovered by adding new partners such as Shopify.
