A group of US senators urged Facebook CEO Mark Zuckerberg to immediately end the Novi digital wallet pilot launch and commit to not bringing Diem stable coin to market.
Yesterday Facebook announced that they are launching their Novi wallet without Diem, but with the help of Coinbase and stable coin Paxos.
In an open letter, Brian Schatz, Sherrod Brown, Richard Blumenthal, Elizabeth Warren, and Tina Smith expressed “strong opposition to Facebook’s renewed effort to launch a cryptocurrency and digital wallet.”
Legislators recalled that the company has repeatedly committed itself not to launch digital currency or any digital product without the approval of federal financial regulators.
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 stable coins 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.”
Senators noted that getting approval to transfer money “in almost every state” is not equivalent to “a blessing from all US regulators.”
Federal agencies are studying the risks that stable coins pose to financial stability and are considering ways to eliminate them, politicians stressed.
Also, in their opinion, Facebook did not provide a “satisfactory explanation” of how it will prevent the use of Diem in illegal financial activities.
Senators recalled the recent scandal with the social network algorithms showing the company is not capable to protect consumers.
“Facebook cannot be trusted to manage a payment system or digital currency wallet when its existing capabilities to manage risk and ensure consumer safety was completely inadequate,” the letter said.
Facebook announced the start of pilot testing of the Novi wallet in the United States and Guatemala using the USDP stable coin from Paxos with the support of Coinbase. Facebook’s head of payments, David Marcus, reiterated that Diem would only launch after regulatory approval.
The Diem Association, behind the development of the stable coin, in response to the senators’ letter, noted that the Facebook Novi Wallet pilot program had nothing to do with Diem. Legislators were also reminded that Facebook is one of two dozen members of the association and it is wrong to directly associate FB with the digital currency project.
— Diem Association (@DiemAssociation) October 20, 2021
Regarding concerns about the use of stable coins in illegal financial activities, the Diem Association indicated that FinCEN gave positive feedback regarding Diem’s control system.