Silvergate Soars After Announcing Partnership With Facebook-Backed Cryptocurrency

Having been hammered in recent weeks for no bigger sin than sporting anti-Midas Cathie Wood (and her ARKK) as one of its bigger prominent investors, Silvergate Capital SI - a small ($2 billion market cap) "provider of infrastructure solutions and services for the growing digital currency industry", i.e., crypto fintech player - soared over 20% in after-hours trading following an 8K announcing that it will become the exclusive issuer of DiemUSD, the stablecoin formerly known as Libra, and which is backed by Facebook.

The Diem Association, a group of Facebook and 25 other companies and nonprofit groups once known as Libra, is moving its main operations to the U.S. and partnering with Silvergate to issue its cryptocurrency backed by U.S. dollars. Silvergate, a prominent but small (its capitalization of just $2BN is smaller than the market cap of most memecoins) player in the cryptocurrency industry, which will issue the coin and manage Diem’s reserve of U.S. dollars, the association said Wednesday in a statement.

According to the partnership press release, Silvergate will issue a U.S. dollar backed stablecoin, known as DiemUSD, the first asset ever issued on the Diem payment system, which will enable the conversion of fiat USD to and from the stablecoin through a process known as “minting” and “burning.” The stablecoins can then be used by virtual asset service providers (“VASPs”) for a variety of use cases, which includes commerce between consumers and merchants, as well as cross-border payments.

In a primer published today, Bank of America writes that Diem aims to occupy the middle ground between unregulated cryptocurrencies and the status quo: "It is a distributed ledger-based system which looks to combine crypto’s resilience and openness with the requirements of global regulators and mainstream finance. It is, we think, a hugely ambitious project, and one which could potentially launch before any of the European central banks’ digital currencies. It aims to address the remittance market, and to introduce more diversity into the payments ecosystem."

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