The Facebook-led digital currency project has taken another turn as the Diem Association is now launching Diem USD stablecoin in partnership with Silvergate Bank. Additionally, the non-profit is moving its base from Switzerland to the United States.
This is the third time Diem, formerly known as Libra, drastically changed its model of issuing a digital currency. It has gone from plans of issuing an asset basket-backed stablecoin to now just a simple stablecoin backed with only US dollars.
Wednesday’s press release detailed that the Diem Networks US, which is a subsidiary of the Diem Association, will run the Diem Payment Network (DPN) to facilitate the stablecoin transactions, and the USD reserves will be held by California-based Silvergate Bank.
“We believe in the future of US dollar-backed stablecoins and their potential to transform existing payment systems,” Silvergate CEO, Alan Lane said. “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.”
However, the latest update did not reveal the fate of the previous digital currency project Facebook and its other partners have been working on. In addition, it is not known what will be the initial extent of the USD-backed stablecoin, whether there will be a pilot first or it will be available to the public at once.
Additionally, the Diem Association moved its primary operations to the United States from Switzerland, citing its strategic focus on the North American country.
Further, the non-profit is withdrawing its application for a payment system license from the Swiss Financial Markets Authority (FINMA). The US arm of Diem will now register as a money service business with the Financial Crimes Enforcement Network to continue operations.
The latest move by Facebook and its digital currency partners has ended most of the original ties with the project. Now, it is to be seen how the US regulators take this step and if the project still faces any backlash in the country.