Facebook launched its new crypto wallet Novibank yesterday, originally intended to hold Facebook’s own Diem stablecoin
Social media giant Facebook announced yesterday that Coinbase has been chosen as the custody partner for its Novi wallet. The news was a major boost for Coinbase, whose shares jumped after being selected to provide custody services for users who sign into the wallet.
Coinbase confirmed the announcement on Tuesday and explained that the service will begin as a pilot program. Users of the Novi platform will be able to send and receive money internationally quickly, securely, and without fees. Coinbase Custody will facilitate transactions. Funds will be held in Pax Dollar (USDP), a stablecoin backed by fiat, which users will then use to execute transfers.
“Remittances are an important tool for financial inclusion. Today we are launching a small pilot of the Novi digital wallet app in two countries — the United States and Guatemala. People can send and receive money instantly, safely, and without fees,” said David Marcus, head of Facebook’s Financial Innovations team, via Twitter.
Facebook says its decision to use USDP for the pilot was based on consumer protections, key regulatory considerations, and the fact that the currency has full fiat backing. The company plans to migrate the wallet from USDP to Diem in the future. Facebook explained the switch will occur because Diem’s purpose-built blockchain for payments provides stronger consumer protections and compliance capabilities.
“Novi’s goal has been and will always be interoperability with other digital wallets, and we believe that a payments-focused blockchain like Diem is critical to delivering solutions for the problems people face in today’s payment systems,” Facebook stated.
Diem was launched in 2019 under the name Libra, but the proposed stablecoin faced setbacks and intense scrutiny. Senators Brian Schatz and Sherrod Brown, among others, warned the social networking company that the project could expose consumers and the financial system to various risks.
Shortly after Facebook announced the Novi wallet, those two senators wrote a letter — joined by Richard Blumenthal, Elizabeth Warren, and Tina Smith — asking Facebook to halt the Diem and Novi projects. The senators criticized Facebook for failing to demonstrate how it would prevent criminal activity and illicit transfers using the new product.
“Facebook cannot be trusted to administer a payment system or digital currency when its current capabilities to manage risk and keep consumers safe have proven completely inadequate. We urge you to stop your Novi pilot immediately and commit to not bringing Diem to market.”