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Sivergate Bank is planning a big push into the USD-backed stablecoin space, focusing on those backed on a one-to-one basis offered by regulated institutions who agree to third-party audits.

Facebook's Diem project is shifting its main operations from Switzerland to the United States, and withdrawing its application for a license from Switzerland's FINMA, as it is not required under the new model. Diem will partner with Caliafornia state-chartered Sivergate Bank who will become the exclusive issuer of Diem's USD stablecoins and will manage the USD reserve. And Diem Networks US will register as a money service business (MSB) with the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN).

Crypto bank Silvergate Capital's stock is down about 47% since the news about FTX started to break, and there is chatter that Silvergate could be facing a run. Its Silvergate Exchange Network (SEN) operates as a real-time dollar and euro payments network for crypto exchanges and institutions (see graphic below). At the end of the third quarter, Silvergate had 1,677 customers, including all of the major crypto exchanges and more than 1,000 institutional investors, using SEN and about $12 billion of non-interest-bearing deposits. Silvergate doesn't charge clients fees to use the SEN network so its main source of revenue is the carry on those deposits. What's probably driving the stock decline are investor concerns about deposit outflows from its exchange clients, as the crypto market slows down, including roughly $1.2 billion from FTX. However, Silvergate has a highly liquid balance sheet. At the end of the third quarter, the bank had nearly $1.9 billion of cash and cash equivalents and another $8.3 billion of available-for-sale securities that can be quickly converted into cash. Also, as a federally regulated bank, Silvergate could also tap the Federal Home Loan Bank or the Federal Reserve. Nevertheless, the situation bears watching.

Silvergate Bank confirmed that it's purchasing Diem's development, deployment and operations tools, as well as tools "for running a blockchain-based payment network" for remittances and other applications. The Diem Association, the stablecoin project from Meta Platforms, will "begin the process of winding down" both the group and its subsidiaries over the next few weeks. Silvergate Bank described Diem's work as running "in a pre-launch phase." Silvergate CEO Alan Lane said they hope to launch a stablecoin by the end of this year.