Five Democratic senators wrote a letter to Facebook founder and CEO Mark Zuckerberg, urging him to put aside the company’s digital currency plans. The letter claimed that the company could not be trusted to operate a digital currency and would pose a threat to financial stability. The letter came hours after Facebook announced it had launched the Novi wallet in a “little pilot”.
Previously called Calibra, the wallet was announced over two years ago as the official wallet for the Diem digital currency, known at the time as Libra. David Marcus of Facebook Financial announced that Novi will embark on a limited pilot project targeting remittance corridors between the United States and Guatemala.
Remittances are an essential means of achieving financial inclusion. Today we are deploying a small pilot from the @Novi digital wallet app in two countries: the United States and Guatemala. People can send and receive money instantly, securely, and at no cost. 1/8
– David Marcus (@davidmarcus) October 19, 2021
The main reason for Facebook’s delay has been regulatory backlash. Marcus, who is the former head of Facebook Messenger, believes the pilot will help the social media giant allay regulators’ doubts.
Although Novi has been launched, it will not integrate the Diem stablecoin. Instead, the wallet will rely on the Paxos USD, or USDP, formerly known as the Paxos Dollar. Users will be able to add US dollars to their Novi wallets and convert them to stablecoin, with users’ funds being stored by Coinbase Custody. Transfers to Novi are reportedly insensitive, but it is not clear whether the conversion to Guatemalan quetzals will be charged.
Marcus clarified: “I want to be clear that our support for Diem has not changed and we intend to launch Novi with Diem once it receives regulatory approval and goes live.”
“We cannot trust Facebook with a digital currency”
Shortly after Facebook launched Novi, five Democratic senators wrote to Mark Zuckerberg for “expressing [their] the strongest opposition to Facebook’s relaunched effort to launch a cryptocurrency and digital wallet, now under the âDiemâ and âNoviâ brands, respectively.
The five Senators â Tina Smith (D-MN), Elizabeth Warren (D-MA), Sherrod Brown (D-OH), Richard Blumenthal (D-CT) and Brian Schatz (D-HI) – pointed out that US regulators are still struggling with stablecoins. Regulators who oversee stablecoins are always studying the risks they pose and how to deal with them, they said. Facebook should therefore not be reckless in its launch of Diem.
General coin risks aside, lawmakers believe that Zuckerberg and his team have not offered a satisfactory answer to their plans to curb illicit financial flows.
âFacebook cannot be trusted to run a payment system or digital currency when its existing ability to manage risk and keep consumers safe has proven to be totally inadequate,â they said, telling Zuckerberg to stop Novi and to undertake not to put Diem on the market.
Diem responded shortly after Zuckerberg received the senators’ concerns. While saying it was happy to engage with Congress on the “robust controls it took two years to put in place,” the organization criticized lawmakers for their superficial understanding of the separation between the two. entities.
âUnfortunately, today’s letter from lawmakers to Facebook misunderstands the relationship between Diem and Facebook. Diem is not Facebook. We are an independent organization and Facebook’s Novi is just one of more than two dozen members of the Diem Association. Novi’s pilot with Paxos has no connection with Diem.
Diem further attacked other statements by senators, one of which concerned a claim that she had yet to show how she would prevent illicit transactions. He claimed the Treasury had provided positive feedback on its financial crime compliance network, which it touted as having “the strongest controls in the business.”
âUnique in the industry, this includes not allowing anonymous transactions with unhosted wallets, until the illicit funding risks they cause can be adequately addressed,â Diem said.
Watch: CoinGeek Zurich Panel, Digital Technology & The Future of Banking & Financial Services
New to Bitcoin? Discover CoinGeek Bitcoin for beginners section, the ultimate resource guide to learning more about Bitcoin – as originally envisioned by Satoshi Nakamoto – and blockchain.