Facebook’s renewed effort to launch a digital currency (Diem) and a digital wallet (Novi) has met with strong opposition from Democratic lawmakers, who have gone on record to state that Facebook cannot be trusted to launch a digital currency.
The senators urged Facebook to dismiss their plans for their wallet Novi and commit not to bring Diem to the market after the company had repeatedly failed to protect its users.
Facebook Cannot Be Trusted.
Senators Brian Schatz (D-Hawaii), Sherrod Brown (D-Ohio), Richard Blumenthal (D-Conn.), Elizabeth Warren (D-Mass.), and Tina Smith (D-Minn.) released a statement ordering Facebook CEO Mark Zuckerberg to halt the company’s work on the pilot of Novi, and also stop its work on the Diem Stablecoin project, committing to not bringing the stablecoin into the market.
The Senators wrote in their letter,
“Facebook is once again pursuing digital currency plans on an aggressive timeline and has already launched a pilot for a payments infrastructure network, even though these plans are incompatible with the actual financial regulatory landscape—not only for Diem specifically but also for stablecoins in general...Unfortunately, Facebook’s decision to pursue a digital currency and payments network is just one more example of the company ‘moving fast and breaking things (and in too many cases, misleading Congress in order to do so). 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.”
The Senators released the open letter shortly after Facebook announced plans of launching a pilot program for its Novi wallet subsidiary in the United States and Guatemala. The pilot project will see Facebook allow users to purchase USDP (Paxos Dollars) and custody them with Coinbase.
A Repeat Of The Original Libra Announcement
The furious backlash is similar to the one Facebook faced when it made the original Libra announcement. Facebook’s vision of Stablecoins was met with derision, as it drew the ire of regulators and lawmakers the world over, including the Senate and the House of Representatives.
The Senators made sure to add a reference to the pushback Facebook met with while noting that both Mark Zuckerberg and Facebook Payments Chief David Marcus had committed to secure regulatory approvals before launching any financial products.
”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 lawmakers also brought into focus Facebook’s prior interactions with Congress, including the allegations that the company could have misled Congress in the past. The letter also pointed out that regulators are currently examining stablecoins and the stablecoin industry, with recommendations expected soon from the President’s Working Group on Financial Markets.
The lawmakers also criticized the lack of any satisfactory explanation as to how Diem would prevent any criminal activity and illicit financial activities, in addition to the risks posed by Diem to financial stability.
Partnership With Coinbase
Facebook’s crypto and digital asset wallet subsidiary, Novi, has announced that it has partnered with Coinbase to launch a pilot program for its services. The program is currently live in the U.S. and Guatemala and is available on Google Play and Apple App Store. Coinbase will support Novi through the Coinbase Custody Service, which provides users with secure storage for their private keys.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.