The Diem Association, the Facebook-linked group building a stablecoin, is partnering with Silvergate Bank to launch a U.S. dollar-pegged stablecoin.
Diem Networks US, a subsidiary of the association, will run the Diem Payments Network and register as a money services business with the Financial Crimes Enforcement Network (FinCEN), while Silvergate will be the formal issuer of the Diem USD stablecoin. Silvergate will also manage the reserve backing the token.
The DPN will be a permissioned network, allowing only approved participants to transact, according to the Wednesday announcement. Silvergate already operates its own payments network, the Silvergate Exchange Network, and provides support for stablecoin transactions.
Diem, formerly known as Libra, will also move its operations out of Switzerland and withdraw its application for a Swiss Financial Markets Authority license, the press release 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,” Diem CEO Stuart Levey said in a statement.
The move represents a sharp departure from Diem’s origins as the Libra Association, which was announced by Facebook in the summer of 2019 and formally created as a partnership with buy-in from a host of different companies in Switzerland that fall.
Diem hoped to launch a FINMA-approved product as recently as this past December.
The then-Libra Association abandoned the original stablecoin vision – as a token backed by a basket composed of different fiat currencies – after regulatory pushback from policymakers worldwide, instead choosing to launch a set of tokens, each backed by a single fiat currency.
The dollar stablecoin will be the first pilot project to launch, CNBC reported last month.
UPDATE (May 12, 2021, 20:55 UTC): Updated with additional information and context.