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The Diem cryptocurrency, once known as Libra, has undergone so much change in the past year that some observers at least might argue it’s almost an entirely different project. The latest development emerged late Wednesday with the announcement that the Diem Association is moving its operations from Switzerland to the United States and focusing on a U.S. dollar stablecoin to be issued by La Jolla, Calif.-based Silvergate Bank, a unit of Silvergate Capital Corp.
The move comes a little more than a year after the project, enmeshed in criticism from banking authorities around the world, applied for a key payments-system license and changed course on a number of its prime strategies, including setting out new plans for single-currency stablecoins and a stronger compliance regime. Since then, the venture has gained five members for a total of 26, including some major names such as Coinbase, Lyft, Shopify, and Uber. Facebook Inc., whose leadership introduced the Libra concept in 2019, is represented by its Novi wallet venture (formerly known as Calibra). In December, it changed its name to Diem, Latin for “day.”
Under the arrangement announced Wednesday, Silvergate Bank, a member of the Federal Reserve, will exclusively issue the new USD stablecoin and manage its reserve. Diem Networks US will register as a money-services business with the Treasury Department’s Financial Crimes Enforcement Network. At the same time, Diem is withdrawing its application to the Swiss Financial Markets Authority (FINMA) for a payments-system license.
“While our plans take the project fully within the U.S. 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,” said Stuart Levey, Diem’s chief executive and a former HSBC and U.S. Treasury official. Levey took over Diem a year ago.
The move to the United States aligns with the project’s focus on the country as an initial market and reflects what its leaders call an “evolving regulatory environment” toward digital currencies in America. It also casts a spotlight on the evolving market for stablecoins backed by national currencies, which have attracted notice in recent years for their predictability in the face of wild swings in the values of Bitcoin and other cryptocurrencies.
“We believe in the future of U.S. dollar backed stablecoins and their potential to transform existing payment systems,” said Alan Lane, Silvergate’s chief executive, in a statement.
