Meta (formerly Facebook) came under much criticism and scrutiny in its failed management of the stablecoin payment system it was developing, winding down development with the sale of the project known as Diem (formerly Libra). Its buyer? Silvergate Capital Corp., a crypto-focused bank that has intentions of using the technology acquired to help launch its own stablecoin payment service later this year, reports Bloomberg.
Silvergate has paid $132 million in stock for Diem of the total $182 million, turning former Diem members into bank shareholders. CEO Alan Lane believes that many of the major companies such as Uber and potentially even Meta Platforms itself will use the stablecoin in the future, and Silvergate is eying the creation of a bank consortium to handle the stablecoin.
Stablecoins can be seen as a bridge between cryptocurrency and fiat money, with their market value tied to an external asset, in this case the U.S. dollar. There are many banks already dabbling and dealing in stablecoins, such as JPMorgan Chase & Co., which uses stablecoins internally for customer transactions. Adoption by some of the biggest consumer services companies such as Meta and Uber could push stablecoins to the forefront and spur public usage and acceptance.
Silvergate plans to make money on the stablecoin payment service through fees for stablecoins issued, fees for retailers, as well as the money it gains on interest of the dollar amount it holds in reserve to support the coin. While Silvergate acquired the intellectual property, the stablecoins, and the payment network, it didn’t transition any of the former employees when purchasing Diem.
“We didn’t hire anybody from Facebook, anybody from Diem,” Lane said. “We are a regulated financial institution running the payment network.”
Investing in Silvergate’s Growth With BLOK
For investors who want access to the growing crypto space with diversified exposure, the Amplify Transformational Data Sharing ETF (BLOK) can be a great solution.
BLOK currently has $1 billion in AUM, is actively managed, and invests in companies directly involved in developing and using blockchain technology. BLOK was also the first blockchain ETF approved by the SEC and launched in 2018.
The fund invests in companies partnered with or directly investing in companies utilizing and developing blockchain technologies. However, the fund does not invest directly in blockchain technology or cryptocurrencies.
BLOK spreads its holdings across the size spectrum, investing in all market caps. As of the end of December, top allocations within the blockchain industry included transactional at 38.0%, crypto miners at 23.0%, and venture at 11%. BLOK invests across the blockchain landscape, in miners, exchanges, and developers.
Silvergate Capital Corp (SI) is carried within the fund at a 4.09% weight.
BLOK has an expense ratio of 0.71% and currently has 45 holdings.
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