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Carked it, Diem? Zuckerberg's grand cryptocurrency thing may sell off assets for $200m

Facebook-born blockchain payment system's day well and truly seized

Diem, the spurned cryptocurrency payment system spawned under the name Libra by Mark Zuckerberg's Facebook (itself now operating as Meta) will reportedly sell its assets to Silvergate Capital Corporation. 

Silvergate, which announced a partnership with the Diem Association in May 2021, is negotiating with Diem to buy its technology for something like $200m, according to reports from Bloomberg, the Wall Street Journal, and Politico.

The deal has not yet been publicly finalized but it may be soon – a Diem spokesperson declined comment when asked to confirm the reports but said he'd be in touch immediately if the situation changes.

It could collapse, too – earlier this month during Silvergate's Q4 2021 earning statement to investors, David Chiaverini, an analyst for Wedbush Securities, said, "With it looking like Diem may not happen, could you talk about your distribution strategy related to the Stablecoin initiative if you were to go about it on your own?"

Alan Lane, president and CEO of Silvergate Capital, declined to discuss Diem – possibly because negotiations were still underway – but affirmed that the company still sees a business opportunity to provide Stablecoins – digital tokens tied to the US dollar – which was why the firm hooked up with Diem last year.

"We intend to be the issuer of a US dollar-backed Stablecoin, and we would expect that the distribution for that Stablecoin would largely happen through our existing customers, as well as new potential customers that have retail distribution," said Lane.

Either way, it looks like Diem's day is done. What started in 2019 as an effort by Facebook to invent its own blockchain-based cryptocurrency and payment system – and remake global finance and data collection in its own tarnished image – seems destined to end with the Diem Association parting out its technology. Meanwhile, Diem's progenitor has pivoted to virtual reality to escape its reputation as an accessory to privacy violations and a willing merchant of misinformation and hate speech.

Diem never really got off the ground. At launch, the project, then known as Libra, had 27 partners, with the hope of reaching 100 by 2020, and was already dogged by privacy concerns that drew the attention of lawmakers. By October 2019, initial partners were already jumping ship, prompting Libra to scale back its ambitions a few months later. 

Libra became Diem in December 2020 in an effort to disassociate itself with Facebook, the least trusted social media service in the US, according to a Washington Post-Schar School poll conducted November 2021. That was a month after Facebook renamed itself Meta.

EU leaders would have none of it and in 2020 EU lawmakers floated the Markets in Crypto-Assets (MiCA) framework to regulate the invented coin market because "the absence of applicable rules to services related to such assets leaves consumers and investors exposed to substantial risks."

According to Politico, Diem's plan to provide a Stablecoin through its partnership with Silvergate Capital was doomed when neither the Fed nor the Treasury Department would support the project. 

A November 2021 Treasury Department report [PDF] on Stablecoins echoes the concerns of EU lawmakers, namely that rules are needed to address market integrity, investor protection, and illicit finance concerns, among others.

The report also suggests why Libra/Diem faced such strong headwinds, noting among other policy concerns that "the combination of a stablecoin issuer or wallet provider and a commercial firm could lead to an excessive concentration of economic power." That is to say no one wanted to further empower Facebook by buying into Facebucks from Facebank.

Silvergate did not respond to a request for comment. ®

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