What happened
Shares of crypto bank Silvergate Capital (SI 9.76%) were up 2% as of 3:35 p.m. ET today. Facebook, which has rebranded itself as Meta Systems (META -0.52%), confirmed it has exited its Diem cryptocurrency project. The assets were acquired by Silvergate, which under previous terms, would have been handling the issuance of the stablecoin for the Diem project.
Image source: Getty Images.
So what
Diem has run into multiple roadblocks from financial regulators around the globe since it was announced in 2019. After numerous partners left the project, it was rebranded as Diem (from the previous name, Libra) back in 2020.
With Facebook parent Meta Systems still facing a long road ahead to getting a sign-off on its digital currency project, it has apparently opted to turn its attention elsewhere. That doesn't necessarily mean an end to Facebook's digital payments aspirations. WhatsApp Payments, for example, is still in pilot mode in Brazil and India.
Now what
Diem and its subsidiaries (like Novi, a payments and digital wallet platform for cross-border money transfers based on the Diem stablecoin) are now winding down their efforts under Meta, and the assets were purchased by Silvergate for $182 million. Silvergate paid just over 1.2 million shares in new stock and $50 million cash for the deal, and expects to incur another $30 million in additional costs this year as it integrates the Diem assets with its own cryptocurrency exchange network.
In a statement explaining the purchase, Silvergate CEO Alan Lane said that his company has "identified a need for a U.S. dollar-backed stablecoin that is regulated and highly scalable." The bank intends to launch its own stablecoin later in 2022 using Diem. As of the end of 2021, the Silvergate Exchange Network -- which handles money transfers for crypto exchange and investment clients -- had 1,381 institutional users. That's an increase from just 969 at the end of 2020.
It remains to be seen how Silvergate will fully utilize Meta's old crypto assets, but the company certainly has established an early track record for success in building the tools crypto investors need. Stay tuned for more details.
