Facebook Receives Warnings from U.S. Senators After Novi Wallet Launch
Facebook launched its Novi wallet in a limited pilot program, according to a press release. After the launch of Novi, Facebook received immediately warnings from by Elizabeth Warren and other U.S. senators.
In its pilot stage, the Novi wallet app will be available to select customers in Guatemala and the United States. The pilot will serve the U.S.-Guatemala remittances corridor, a market in which 56% of people do not have access to banking and financial services, according to David Marcus, who heads Novi.
In a Twitter thread Marcus said:
“[..] it’s time for the internet to have a protocol for money, and it’s time to try something new for the 1.7 billion people who are still unbanked 30 years after the invention of the web.”
The Novi wallet will not initially support the project’s native Diem stablecoin, but it will support the Paxos Dollar (USDP). Paxos is a trusted and widely supported stablecoin with three years of operation, which will allow Novi to be interoperable with other cryptocurrency wallets that support USDP, according to Marcus.
He also pointed out that the project still intends to launch Novi with Diem once the coin gains regulatory approval, and assured that future versions of Novi will offer free person-to-person payments. Those no-fee transactions will distinguish the services from competitors such as PayPal.
Coinbase also announced today that it will serve Novi in a custodial role, storing funds on behalf of the wallet and its users. The company will provide cold storage as well as $320 million in insurance against criminal attacks.
Washington fights back
Meanwhile, lawmakers have attempted to block the launch, as the U.S. Senate wrote an open letter to Facebook opposing the plan.
The Novi launch was met with immediate resistance, however, in the form of an open letter to Mark Zuckerberg from the U.S. Senate Banking Committee, which it issued to voice the Committee’s opposition to Facebook’s revived effort to launch a cryptocurrency and digital wallet.
The Committee stated in the letter:
“Facebook cannot be trusted to manage a payment system or digital currency when its existing ability to manage risks and keep consumers safe has proven wholly insufficient.”
In 2019, the development of Facebook’s first flagship cryptocurrency, Libra, faced a wall by a moratorium issued by House Financial Services Committee Chair Maxine Waters. Facebook later began developing a different cryptocurrency, Diem.
The Committee, however, expressed concern that Facebook had not sufficiently addressed Congress’ regulatory concerns surrounding Libra before launching yet another digital currency—nor, it alleges, did Facebook wait for regulatory clarity from federal authorities before proceeding with its initiatives, as it had promised to do.
The Committee points out that while Novi’s lead, David Marcus, did attain approval from “nearly every state,” the Committee nevertheless wrote: “To be clear, your ability to secure state-issued money transmitter licenses is not equivalent to obtaining the blessing of ‘all U.S. regulators,’ as you said in your testimony two years ago.”
The Committee also expressed concerns over stablecoins more generally in today’s letter, calling plans for payment systems based on stablecoins “incompatible with the actual financial regulatory landscape.” The Senators also expressed doubt regarding Facebook’s ability to properly regulate stablecoins within its ecosystem, writing: “Facebook cannot be trusted to manage a payment system or digital currency when its existing ability to manage risks and keep consumers safe has proven wholly insufficient.”
Notably, Novi does not incorporate Facebook’s own long-anticipated cryptocurrency Diem. This does not appear to have mollified the group of senators, who also include Brian Schatz (D-HI), Sherrod Brown (D-OH), Richard Blumenthal (D-CT) and Tina Smith (D-MN).
Marcus highlighted in a tweet the Diem stablecoin was not intended to be included in the Novi rollout today, and is waiting for a regulatory approval:
I do want to be clear that our support for Diem hasn’t changed and we intend to launch Novi with Diem once it receives regulatory approval and goes live. We care about interoperability and we want to do it right. 5/8
