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At present, Diem is working with Silvergate to issue its stablecoin backed by the US Dollar.
Facebook‘s digital currency venture Diem announced on Wednesday that it was no longer pursuing a payment system license with Switzerland’s financial market supervisory authority FINMA. The Diem Association has resolved instead, to base its operations in the US.
The association, through its US subsidiary, Diem Networks US, has partnered with California state-chartered lender Silvergate to issue a stablecoin. Diem also plans to move their operational headquarters from Geneva to their United States base in Washington DC, and to register as a money services business with the US Department of the Treasury’s Financial Crimes Enforcement Network.
Diem CEO Stuart Levey commented:
“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”.
Plans for the Diem Project (formerly Libra) were made public in June 2019.
The project’s initial plans were to create a universal currency linked to some major currencies. It encountered serious backlash from government officials and financial regulators. They feared that it would pose a threat to the sovereignty of major currencies and promote money laundering. They also pointed out that a currency of that nature had the potential to violate user privacy. Several key supporters – including eBay, MasterCard, PayPal and Visa walked out on the project.
Following this backlash, the association settled on creating a multi-currency coin and several stablecoins, each backed by a different currency.
At present, the association is working with Silvergate to issue its stablecoin backed by the United States Dollar.
Silvergate CEO Alan Lane said:
“We believe in the future of U.S. dollar-backed stablecoins and their potential to transform existing payment systems […] We’re inspired by Diem’s technology and commitment to building a regulatory compliant payment system that offers a safe and secure way to move money. We’re excited to be at a place in the process where we can announce this product with confidence and look forward to continuing our work with Diem to bring this to market.”
In this partnership, Silvergate will be the sole issuer of the Diem USD stablecoin and will manage the stablecoin’s reserves. Diem Networks US will oversee the Diem Payment Network (DPN), a permissioned blockchain network where only approved members will be allowed to make transactions.
According to the state, this partnership is in preparation for a Diem USD pilot.