Silvergate Capital to Buy Facebook Cryptocurrency Project Tech
Posted on 01/27/2022
Silvergate Capital Corporation purchased Facebook’s cryptocurrency project that was once called Libra. Facebook is now called Meta. The Diem Association is Facebook’s crypto project and it is winding down and sold its technology to Silvergate Capital for US$ 200 million.
Founded originally as Libra in 2019, the Diem Association was looking on cashing out on its remaining assets. Facebook wanted to create a stablecoin linked in value to fiat currencies.
However, U.S. politicians and regulators criticized Mark Zuckerberg’s ambitions on building a crypto. After getting heat from U.S. regulators, several high profile partners in the crypto project pulled out.
In May 2021, the Diem Association announced Silvergate Bank, a subsidiary of Silvergate Capital, would be the issuer of its currency. However, the Diem coin was never launched.
In 2021, Facebook launched a crypto wallet called Novi (formerly called Calibra) without Diem. Novi launched without support for Diem and issued another stablecoin called the Pax Dollar (USDP). According to Paxos, theUSDP is regulated and they claim its redeemable one-to-one for U.S. dollars. USDP reserves are held 100% in cash and cash equivalents.
Deal Update: February 1, 2022
Under the terms of the asset purchase agreement, Silvergate has issued 1,221,217 shares of class A common stock to Diem and paid $50 million in cash. Based on the closing price of Silvergate Capital Corporation on January 31, 2022, the aggregate value of the consideration was $182 million. As part of integrating the acquired assets into Silvergate’s existing technology, Silvergate expects to incur approximately $30 million of additional costs in 2022. The assets acquired by Silvergate include development, deployment and operations infrastructure and tools for running a blockchain-based payment network designed to facilitate payments for commerce and cross-border remittances. The network, which has been operating in a pre-launch phase, was built by a world-class group of engineers over a two-year development cycle with architectural quality evidenced by its security, reliability and scalability. Included in the acquisition are proprietary software elements critical to running a regulatory-compliant stablecoin network.
“intellectual property and other technology assets related to running a blockchain-based payment network”
Goldman Sachs & Co. LLC served as financial advisor to Silvergate and Holland & Knight served as Silvergate’s legal advisor. Architect Partners LLC served as financial advisor to Diem and O’Melveny & Myers LLP, Skadden, Arps, Slate, Meagher & Flom LLP, and Fenwick & West LLP served as Diem’s legal advisors.