The Diem Association has shifted its operations to the US and partnered with crypto-friendly US bank Silvergate, which will become the exclusive issuer of the Diem USD stablecoin.
Facebook has not backed down from developing and bringing to the market its cryptocurrency project, Diem. Following the unsuccessful efforts to obtain a payments license from Swiss regulator Finma, the project has shifted its focus to the US.
The partnership with Silverage is an important step in preparation for a Diem USD pilot. Diem Networks US will register as a money services business with the US Department of the Treasury’s Financial Crimes Enforcement Network, ahead of plans to conduct a pilot for P2P transactions.
Stuart Levey, chief executive officer of Diem, commented: “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 realise this shared vision.”
The Diem Association is aiming to launch a pilot with a single stablecoin pegged to the U.S. dollar in 2021.
Formerly known as Libra, the Facebook-backed digital currency project faced strong opposition from regulators and lost several key backers and executives.
Quitting on a Swiss FINMA license can be seen as another setback for the controversial crypto project, which has faced stiff opposition from financial regulators.
“While our plans take the project fully within the US regulatory perimeter and no longer require a license from Finma, the project has benefited greatly from the intensive licensing process in Switzerland and the constructive feedback from Finma and more than two dozen other regulatory authorities from around the world convened by Finma to consider the project”, Mr. Levey said.
Diem has gone through a complete makeover and started engaging in talks with Swiss financial regulators to secure a payments license in April. The failed efforts have changed the association’s mind.
The association said its subsidiary, Diem Networks U.S., will instead register as a money services business with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and run a blockchain-based payment system that allows the real-time transfer of U.S. dollar-backed stablecoins.
La Jolla, California-based Silvergate Bank will become the exclusive issuer of the stablecoin, Diem USD, and will manage the currency reserve, the association said.
The 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.