Silvergate Bank is one of the few U.S. banks serving crypto-related businesses. Silvergate lists Coinbase, Kraken, Bitstamp and others as customers
United States, May 13, 2021 /AlexaBlockchain/ – The crypto bank Silvergate Capital and Diem Networks US have announced a partnership that will see Silvergate become the exclusive issuer of the Diem USD stablecoin, formerly know as Facebook’s Libra project.
Diem
The Libra Association put together by Facebook last year rebranded to Diem after facing a regulatory backlash. Diem plans to issue a single stablecoin pegged to the US dollar, contrary to the earlier plans of Libra to issue a series of stablecoins backed by individual traditional currencies, as well as a token based on the currency-pegged stablecoins. Diem has built a blockchain-based payment system to support financial inclusion and financial services innovation.
Diem Networks US
Diem Networks US is the primary operating entity of the Diem Association. The Diem Association is a member-based association dedicated to building a blockchain-based payment system that supports financial innovation, inclusion, and integrity. Its 26 members include merchants, payment service providers, social impact partners, and other entities.
Silvergate – Diem Partnership: Why does it matter?
Silvergate Capital
Silvergate Capital Corp. is a bank holding company for Silvergate Bank, which is a provider of financial infrastructure solutions and services to participants in the digital currency industry. Silvergate Bank is one of the few U.S. banks serving crypto-related businesses. Silvergate lists Coinbase, Kraken, Bitstamp and others as customers.
The Silvergate-Diem partnership is an important step in preparation for a Diem USD pilot.
Apart from becoming the exclusive issuer of the Diem USD stablecoin, Silvergate will also manage the Diem USD reserve.
Diem Networks US will run the Diem Payment Network (DPN), a permissioned blockchain-based payment system that facilitates the real-time transfer of Diem stablecoins among approved network participants.
“Silvergate is a leader in financial innovation and an ideal partner for Diem as we move forward with a blockchain-based payment system that protects consumers and enhances the integrity of the financial system,” said Stuart Levey, chief executive officer of Diem.
“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.”
“We believe in the future of U.S. dollar backed stablecoins and their potential to transform existing payment systems,” said Alan Lane, chief executive officer of Silvergate. “We’re inspired by Diem’s technology and commitment to building a regulatory compliant payment system that offers a safe and secure way to move money. We’re excited to be at a place in the process where we can announce this product with confidence and look forward to continuing our work with Diem to bring this to market.”
Diem Moves From Switzerland to the United States
Diem is simplifying its plans for the Diem USD stablecoin issuance by shifting its primary operations from Switzerland to the United States. This shift is consistent with Diem’s initial strategic focus on the United States and reflects Diem’s consideration of the evolving digital currency regulatory environment in the US.
As a result, Diem announced that it is withdrawing its application for a payment system license from the Swiss Financial Markets Authority (FINMA), as a FINMA license is not required under the new model.
Silvergate is a California state-chartered bank and a member of the Federal Reserve. Diem Networks US said that it will register as a money services business with the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).