Social media giant Facebook has chosen Coinbase to take care of custody for its new digital wallet called Novi.
Novi is Facebook’s attempt at a zero-fee global stablecoin payments system, and is currently only available in the United States and Guatemala for its pilot rollout. The platform uses Pax Dollars (USDP), and will be using Coinbase Custody to keep funds secure with its proprietary, segregated cold storage and private key management.
Novi users’ funds will be held inside New York-based Coinbase Custody Trust Company, which is regulated under the New York Department of Financial Services and is a fiduciary under New York state banking law.
David Marcus who heads Facebook Financial (F2) said that when it gets the green light from regulators, the platform will end up utilizing Diem, Facebook’s original effort for a stablecoin that would be backed by a basket of fiat currencies.
“The Novi pilot uses USDP (Pax Dollar) through partnerships with Paxos and Coinbase. USDP is a well-designed stablecoin that’s been operating successfully for over three years and has important regulatory and consumer protection attributes. 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.”
Shortly following the announcement of Facebook’s ambitions to rollout Novi, US officials began publicly urging the social media giant to shut it down. In a letter from Senators Brian Schatz, Elizabeth Warren, Richard Blumenthal, Sherrod Brown, and Tina Smith, the officials remind Mark Zuckerberg of a previous controversy surrounding Facebook, and demand that the tech behemoth not go through with Novi.
“Dear Mr. Zuckerberg:
Policymakers are once again facing a scandal involving reports about Facebook’s relentless pursuit of profits at the expense of its users. The most recent allegations detail Facebook’s knowing use of algorithms that harm adolescents and teens, particularly girls. Facebook has repeatedly shown itself indifferent to the harms its products cause. Given the scope of the scandals surrounding your company, we write to voice our strongest opposition to Facebook’s revived effort to launch a cryptocurrency and digital wallet, now branded ‘Diem’ and ‘Novi,’ respectively.”
The Senators assert that Facebook’s Diem and Novi are imcompatible with the US regulatory landscape, and pose significant risks to financial stability, including the enabling of criminal money laundering. They say that Facebook’s decision to pursue a digital currency and payments network is another example of the company “moving fast and breaking things,” and misleading Congress in order to do so.
“Time and again, Facebook has made conscious business decisions to continue with actions that have harmed its users and the broader society. 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. We urge you to immediately discontinue your Novi pilot and to commit that you will not bring Diem to market.”
At the time of writing, there has been no response from anyone at Facebook or Coinbase.