Why Silvergate Capital Stock Rebounded 2% Today
Crypto bank stocks Silvergate Capital (NYSE:IF) were up 2% at 3:35 p.m. ET today. Facebook, which renamed itself Meta-systems (NASDAQ:FB), confirmed to have left his Diem cryptocurrency project. The assets were acquired by Silvergate, which under previous terms would have managed the issuance of the stablecoin for Project Diem.
Diem has faced multiple hurdles from financial regulators around the world since its announcement in 2019. After many partners left the project, it was rebranded as Diem (from the previous name, Libra) in 2020.
While Facebook’s parent company, Meta Systems, still has a long way to go to get approval for its digital currency project, it has apparently chosen to shift its focus elsewhere. That doesn’t necessarily mean the end of Facebook’s digital payments aspirations. WhatsApp Payments, for example, is still in pilot mode in Brazil and India.
Diem and its subsidiaries (such as Novi, a payment and digital wallet platform for cross-border money transfers based on diem stablecoin) are currently ending their efforts under Meta, and the assets have been purchased by Silvergate for 182 millions of dollars. Silvergate paid just over 1.2 million shares in new stock and $50 million in cash for the deal, and expects to incur an additional $30 million in incremental costs this year integrating Diem’s assets to its own cryptocurrency exchange network.
In a statement explaining the purchase, Silvergate CEO Alan Lane said his company had “identified the need for a regulated, highly scalable US dollar-backed stablecoin.” The bank intends to launch its own stablecoin later in 2022 using Diem. At the end of 2021, the Silvergate Exchange Network – which handles money transfers for crypto exchange and investment clients – had 1,381 institutional users. That’s an increase from just 969 at the end of 2020.
It remains to be seen how Silvergate will make full use of old Meta crypto assets, but the company has certainly established an early track record of success in building the tools that crypto investors need. Stay tuned for more details.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Nicholas Rossolillo and his clients own Meta Platforms, Inc. and Silvergate Capital Corporation. The Motley Fool owns and recommends Meta Platforms, Inc. The Motley Fool recommends Silvergate Capital Corporation. The Motley Fool has a disclosure policy.
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