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Mark Zuckerberg’s ambitions for a Facebook cryptocurrency are officially over. A crypto bank that snapped up its ‘Diem’ project now plans to issue a stablecoin of its own this year.

Facebook CEO, Mark Zuckerberg.

Kevin Dietsch/Getty Images

  • Mark Zuckerberg’s plans to launch a Facebook-backed cryptocurrency have hit a dead end.
  • The Diem Association has sold its assets to crypto bank Silvergate Capital for $182 million.
  • Silvergate’s CEO Alan Lane said the bank hopes to bring a stablecoin to market this year.

Diem, Facebook’s once-ambitious cryptocurrency venture, officially no longer exists.

The association behind Diem said Monday it is selling its assets and intellectual property to crypto bank Silvergate Capital. The bank paid $182 million for the project, settled via a combination of stock and cash.

Silvergate said the assets it bought from Diem include development, deployment, and operation tools to run a blockchain-based payment network. 

Diem was meant to be a stablecoin alternative to fiat money, backed by a wide mixture of currencies and government debt. But the crypto venture, launched by Facebook in 2019, was stalled for a considerable period by regulatory pressures.

It wasn’t just that Diem was seen as a potential threat to the US dollar, given that social media giant Facebook has more than 1.9 billion active users. Concerns over a lack of user privacy protections and fears it could disrupt financial stability thwarted the project as it ran into a series of setbacks.

Even a rebrand from Libra to Diem, a move to somehow help it gain acceptance, didn’t work.

First, it was abandoned by prominent backers including Visa, Mastercard, and PayPal — because of seemingly endless scrutiny. Then David Marcus, the Facebook executive overseeing crypto ventures, left the company last year.

Diem said it approached global regulators for feedback, which helped the project evolve. But it “became clear from our dialogue with federal regulators that the project could not move ahead,” CEO Stuart Levey said.

Marcus hinted at feelings of frustration over the behavior of certain regulators in a Twitter thread on Monday.

—David Marcus – dmarcus.eth (@davidmarcus) January 31, 2022

 

Silvergate to bring a stablecoin to market this year

Silvergate is one of the few traditional banks to get involved with cryptocurrencies so far.

The San Diego-based bank initially partnered with Diem to issue Facebook’s stablecoin, so it’s already familiar with the network.

Now it plans to take over the project and go ahead with its own stablecoin launch this year, in what appears to be yet another rebranding of Diem. 

“The Facebook engineers that developed this over the last couple years are truly world-class engineers,” Silvergate CEO Alan Lane told CNBC’s “Mad Money” host Jim Cramer on Monday.

“We were working last year with Diem and we got to know the team very well, and we couldn’t be more excited to, essentially, be taking the reins and bringing a stablecoin to market hopefully later this year.”

Lane said Silvergate’s goal is to widen the everyday use case of stablecoins, pegged to reserve assets like the dollar, from the current scenario where they’re mostly used in crypto trading.

 “Where we see the opportunity is creating a stablecoin that could be used by folks … to pay for things,” he added.

When asked what value Silvergate places on Diem’s assets, Lane said: “We think the potential worth is off the charts when we think about using the blockchain technology for payments and remittance.”

“It’s kind of the original promise of bitcoin, but folks don’t want to be spending their bitcoin with all that volatility. But the blockchain technology is here, and we think that’s what a Silvergate-issued stablecoin can provide.”

Read More: I just tried to buy altcoins in the UK and it was a nightmare. Here’s how I ended up with $10 locked in an eToro account — and why I think it’s a sign that crypto needs a bear market

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