Silvergate's Acquisition of Diem's Assets Positive for Stablecoin Launch, Analysts Say

Silvergate Bank's planned stablecoin could benefit from the distribution and potential partnerships with Diem Association members and other money service providers, Wedbush Securities analysts said in a note following news of Silvergate's deal to buy assets of Meta Platforms' (formerly Facebook's) Diem.

• The distinction about who controls the payment network is a significant positive, Wedbush said, and it puts Silvergate in "pole position" to develop distribution partnerships with marquee consumer brands, including Meta.
• ”The purchase price represents good value for Silvergate given the sophisticated technology that is being acquired, and the acquisition should accelerate the launch of its stablecoin," the report said.
• Silvergate's purchase of Diem’s technology and payment network "significantly accelerates" the company's strategic plans and "materially adds to revenue upside," B. Riley Securities said in a different research report published Tuesday.
• The deal allows Silvergate to control the technology and build a payment network with greater revenue upside, B. Riley said.
• It also allows Silvergate to charge higher fees on transactions and at a much higher rate versus the previous structure with Diem, B. Riley added.
• The deal could also give the crypto-focused bank an advantage over other stablecoin issuers because the bank's stablecoin will be issued in a "regulatory friendly way" and can be integrated with the Silvergate Exchange Network (SEN).
• Silvergate confirmed on Monday that it is buying the technology and other assets from Diem, the stablecoin project from Meta that was originally announced as Libra in 2019.
• The company plans to launch a stablecoin by the end of this year, CEO Alan Lane said in an interview Monday.
• Silvergate shares closed 2.9% higher Tuesday following news of the deal.

Read more: Diem Confirms Shutdown as Silvergate Acquires the Project's Assets