The Diem Association, a consortium of companies working on a blockchain-based payment system, is selling its technology assets to Silvergate Capital for $200 million, according to a report from the WSJ. Meta, the company formerly known as Facebook, is one of the founding members of the association. Diem represented Facebook’s most ambitious bet on cryptocurrencies.
Update 1/31 2:50 pm PT: it’s official (though no confirmation on deal terms).
Earlier this week, Bloomberg also reported that Meta was working on selling Diem’s assets as a way to return some capital to the investors behind the project.
Originally called Libra, Facebook unveiled the crypto effort back in 2019. Since then, the Diem Association and Facebook have both scaled back their ambitions several times. At first, the Libra cryptocurrency was supposed to be a brand new currency tied to a basket of fiat currencies and securities.
From the beginning, the Libra Association faced strong opposition from regulators and central banks. Many thought that Libra would compete with sovereign currencies with profound macroeconomic effects. It could have led to shadow banking, inflation and would have been a way to escape monetary policies.
That’s why the Libra Association switched to a more realistic take on stablecoins. Instead of creating a new currency from scratch, the Libra Association decided to launch several single-currency stablecoins. For instance, one LibraUSD was supposed to be worth one USD at all times. The same would apply to LibraGBP, LibraEUR, etc.
But that plan changed once again. The Libra Association became the Diem Association, and Facebook launched a pilot version of Novi, its cryptocurrency wallet. Instead of using the association’s stablecoin (Diem) on the association’s blockchain (the Diem network), Novi uses USDP as its currency. This stablecoin is issued by Paxos, with Coinbase managing crypto custody.
A couple of months ago, David Marcus, who led all things crypto for Meta, also left the company. While Diem’s cryptocurrencies have yet to launch, Silvergate Capital was supposed to issue some of the stablecoins and back them with cash in their account, according to the WSJ.
If the sale of the Diem Association’s assets goes through, Meta and its partners in the association will get some money back, while Silvergate Capital will become the only company in charge of the Diem project.
Some of the companies currently involve in the Diem Association include Anchorage, Andreessen Horowitz, Checkout.com, Coinbase, Iliad, Spotify, Uber and Union Square Ventures.