WASHINGTON, May 12, 2021 /PRNewswire/ -- The Diem Association is pleased to announce a partnership between its wholly-owned subsidiary, Diem Networks US, and Silvergate Capital Corporation (NYSE: SI). Under this partnership, Silvergate Bank ("Silvergate") will become the exclusive issuer of the Diem USD stablecoin. The Association is also announcing a strategic shift to the United States, resulting in a move of Diem's primary operations from Switzerland to the United States.
Diem has built a blockchain-based payment system to support financial inclusion and responsible financial services innovation. Silvergate will become the exclusive issuer of the Diem USD stablecoin and will manage the Diem USD reserve. Diem Networks US will run the Diem Payment Network (DPN), a permissioned blockchain-based payment system that facilitates the real-time transfer of Diem stablecoins among approved network participants. The formation of this partnership is an important step in preparation for a Diem USD pilot.
"Silvergate is a leader in financial innovation and an ideal partner for Diem as we move forward with a blockchain-based payment system that protects consumers and enhances the integrity of the financial system," said Stuart Levey, chief executive officer of Diem. "We are committed to a payment system that is safe for consumers and businesses, makes payments faster and cheaper, and takes advantage of blockchain technology to bring the benefits of the financial system to more people around the world. We look forward to working with Silvergate to realize this shared vision."
"We believe in the future of U.S. dollar backed stablecoins and their potential to transform existing payment systems," said Alan Lane, chief executive officer of Silvergate. "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 parallel with establishing this partnership, Diem is simplifying its plans for the Diem USD stablecoin issuance by shifting its main operations from Switzerland to the United States. This shift is consistent with Diem's initial strategic focus on the United States and reflects Diem's consideration of the evolving digital currency regulatory environment in the US.
As a result, Diem is withdrawing its application for a payment system license from the Swiss Financial Markets Authority (FINMA), as a FINMA license is not required under the new model. Silvergate is a California state-chartered bank and a member of the Federal Reserve, and Diem Networks US will register as a money services business with the US Department of the Treasury's Financial Crimes Enforcement Network.
"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," said Levey.
The Diem Association is a member-based association dedicated to building a blockchain-based payment system that supports financial innovation, inclusion, and integrity. Its 26 members include merchants, payment service providers, social impact partners, and other entities. Diem Networks US is Diem's primary operating entity. The Diem Payment Network offers a faster, lower cost way to make payments with robust controls to protect consumers and fight financial crime. It is designed to enable interoperability between network participants, which will drive competition and benefit consumers, and to complement public sector infrastructure and integrate with central bank digital currencies if they become available.