The Diem Association, the Meta Platforms-led enterprise that was looking to issue a new, user-friendly stablecoin, is selling its technology to Silvergate Capital for $200 million, The Wall Street Journal reported, citing an unnamed person.
The California bank, which serves blockchain companies, had agreed last year to partner with Diem in launching a U.S. dollar-pegged stablecoin. The agreement was supposed to breathe fresh air into a struggling project, which Meta Platforms had kickstarted under the name Libra in 2019 when the company was still called Facebook.
Diem was in discussions with investment bankers to sell its intellectual property to return money to investors, Bloomberg reported on Tuesday, citing unnamed sources.
As Libra, the project originally envisioned a stablecoin backed by a basket of fiat currencies that could be used worldwide as a means of exchange. But it immediately spurred international regulatory backlash, with lawmakers demanding that all development cease until they could provide some regulatory guidance and ensure that it didn't threaten financial stability.
In December 2020, the Libra Association rebranded as Diem to try a different approach, but the initiative continued facing headwinds, including the departure of key executives.
Diem Networks U.S., a unit of the association, would run the Diem Payments Network and register as a money services business with the Financial Crimes Enforcement Network (FinCEN), while Silvergate would be the formal issuer of the diem USD stablecoin and manage the reserves backing the token.
But the U.S. Federal Reserve expressed concerns about this plan and wouldn't guarantee that it would give its approval.
Federal lawmakers also pushed back against Novi (formerly Calibra), a Meta subsidiary focused on building a wallet that would be compatible with Diem. Novi announced a pilot program in partnership with Paxos last autumn.