Facebook-backed digital currency project Diem is moving its operations to the US following a decision to withdraw its application for a payments licence in Switzerland.
The Facebook-backed digital currency project Diem is to move its operations to the US, following a decision to withdraw its application for a payments licence in Switzerland.
The Geneva-based Diem Association, which manages the project, said it has halted plans to pursue regulatory approval from Switzerland’s watchdog Finma. Meanwhile, its US subsidiary has secured a partnership with Californian bank Silvergate to issue its digital currency instead.
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Diem chief executive Stuart Levey said the project had benefited from Finma’s insight so far, as well as more than two dozen other regulators from around the world.
Levey added that the firm’s plans to now “take the project fully within the US regulatory perimeter and no longer require a license from Finma”.
Diem will now shift its operational headquarters from Geneva to Washington, DC, and seek registration as a money services business with the US Treasury’s Financial Crimes Enforcement Network.
The currency will be a stablecoin tethered to the US dollar, shifting away from the project’s original plans. Formerly known as Libra, the concept was initially for the currency to be pegged to a basket of traditional currencies and government debt. This provoked financial stability concerns from regulators, as well as fears over privacy infringement and money laundering.
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The Diem project has long been plagued with issues, from repeated delays for a pilot launch to the exodus of many of its founding members, including Visa, Mastercard and PayPal. It also lost a number of its top executives.
Silvergate’s chief executive Alan Lane said the bank supports “the future of US dollar-backed stablecoins and their potential to transform existing payment systems”. The bank plans to continue developing a blockchain-based payment system alongside Diem as part of the partnership.
Diem said the partnership with Silvergate is “an important step in preparation for a Diem USD pilot” in future.
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