Bloomberg has reported that the Diem Association is exploring selling its intellectual property and finding a home for its development team to return money to investors, based on un-named sources. The Wall Street Journal says the holding company of Silvergate Bank is considering buying the technology for $200 million. The Diem stablecoin (formerly Libra) was founded by Facebook (Meta) in June 2019 and encountered massive regulatory pushback both in the United States and from central banks worldwide.
According to the Bloomberg report, Meta still owns a third of the venture, despite an array of outside investors randing from venture capital firm Andreessen Horowtiz, to Coinbase, Uber and Singapore investment giant Temasek.
In many ways, the signs have been there for some time. The most recent is the departure of David Marcus from Meta. He was the founding force behind both Diem and Meta’s Novi wallet. Novi recently launched limited pilots with the Paxos stablecoin, but that too faces significant headwinds from regulators.
In May last year, a frustrated Diem abruptly announced a move from Switzerland to the United States. This was perhaps in response to interpretive letters from the U.S. Office of the Comptroller of the Currency (OCC), which relaxed its stance on stablecoins. However, there have been leadership changes at the OCC. And stablecoins face regulation, particularly those associated with massive networks such as Meta.
At that stage, Diem said U.S. bank Silvergate would be the exclusive issuer of its stablecoin. However, Bloomberg reported that the Federal Reserve was resistant and hence Silvergate was unable to proceed. A blog post by David Marcus in August last year made us question whether Diem was blocked at that point.
This is a result that the regulatory and central bank community will likely celebrate. That’s despite Diem making significant efforts to be regulatory compliant. For the more hardcore anti-establishment cryptocurrency community, it could add fuel to the fire. But they appear to be the minority. For now.
Update: added WSJ report that Silvergate in talks buy the technology