Statement by Diem CEO Stuart Levey on the Sale of the Diem Group’s Assets to Silvergate
WASHINGTON, DC – The Diem Association today announced the sale of its intellectual property and other assets related to the running of the Diem Payment Network to Silvergate Capital Corporation (“Silvergate”) (NYSE: SI). Diem Networks US (“Diem”) CEO Stuart Levey issued the following statement accompanying the announcement:
“From the outset, the Diem project has been focused on leveraging the benefits of blockchain technology to design a better and more inclusive payment system. The members of the Diem Association and our outstanding team pursued this vision with determination and perseverance, motivated by the desire to deliver substantial benefits to consumers and businesses, along with a payments solution for those who are currently underserved or excluded altogether from the traditional financial system.
We are proud of the work that the Association, our partners, and our team have done. This has included building and testing a blockchain-based payment system with industry-leading controls to protect consumers and combat financial crime, that is intended to be safe for people making ordinary day-to-day payments.
One of our highest priorities in designing the Diem Payment Network was building in controls to protect it against misuse by illicit actors. We addressed that concern in ways that are novel in the industry, implementing numerous controls that were recognized as innovative by regulators. Among these controls was a prohibition on anonymous transactions, which pose both a sanctions and money laundering risk.
As we undertook this effort, we actively sought feedback from governments and regulators around the world, and the project evolved substantially and improved as a result. In the United States, a senior regulator informed us that Diem was the best-designed stablecoin project the US Government had seen.
We are gratified that the subsequent Report on Stablecoins issued by the President’s Working Group on Financial Markets validated many of Diem’s core design features. Those features address not only the risks related to the issuance of a stablecoin, but also the risks associated with transferring stablecoins between parties.
Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead. As a result, the best path forward was to sell the Diem Group’s assets, as we have done today to Silvergate.
We remain confident in the potential for a stablecoin operating on a blockchain designed like Diem’s to deliver the benefits that motivated the Diem Association from the beginning. With today’s sale, Silvergate will be well-placed to take this vision forward. Over the coming weeks, the Diem Association and its subsidiaries expect to begin the process of winding down, but we look forward to seeing the design choices – and the ideals – of Diem thrive.”
Eric Zabinski, Eric Geffner, Ashleigh Stanley, David Johnson, and Sarah Levesque at O’Melveny & Myers LLP, Stuart Levi and Mana Ghaemmaghami at Skadden, Arps, Slate, Meagher & Flom LLP, and Mark Jansen and Meghan Kloeber at Fenwick & West LLP served as Diem’s legal advisors. Eric Risley and Peter Stoneberg at Architect Partners LLC served as financial advisors to Diem. Goldman Sachs & Co. LLC served as financial advisor to Silvergate and Holland & Knight served as Silvergate’s legal advisor.