Facebook Can’t Be Trusted to Manage Cryptos, US Senators Say Following Novi Launchby Fintechnews Switzerland October 20, 2021
A number of US lawmakers jointly issued a statement saying that Facebook cannot be trusted to manage cryptocurrency and has urged Mark Zuckerberg to stop the launch of Novi and Diem immediately.
Facebook had just announced the pilot launch of Novi, the new name and brand for the digital wallet that will help people send and hold Libra digital currencies, in Guatemala and the US except for Alaska, Nevada, New York and the US Virgin Islands.
The pilot version of Novi will only be available to a limited number of people and others may be placed on a waitlist when they sign up.
Facebook said that one can sign up for Novi using a valid government-issued ID and add money to their accounts with a debit card.
Novi users will then be able to send and receive money using USDP (Pax Dollar) through partnerships with Paxos and Coinbase, who recently faced its own spat with regulators over its crypto lending product.
The social media giant mentioned that it was planning on migrating Novi to the Diem payment network once it secures the necessary regulatory approvals. This will be an uphill battle given the strong opposition from the senators.
US senators Brian Schatz, Sherrod Brown, Richard Blumenthal, Elizabeth Warren and Tina Smith voiced their opposition to Facebook’s revived effort to launch its cryptocurrency Diem and the digital wallet Novi.
In light of yet another scandal involving Facebook’s failure to protect its users, the senators urged Facebook CEO Mark Zuckerberg to immediately discontinue the company’s pilot of Novi, and to commit not to bring Diem to market.
The senators wrote in their letter to Zuckerberg,
“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.”
In October 2019, Senators Schatz and Brown wrote to members of the Diem Association’s predecessor, the Libra Association, and expressed deep concerns about the risks the project posed to consumers and the financial system.
Facebook subsequently shelved Libra amid regulatory scrutiny, but the company has now revived its efforts under new branding.