- In a letter addressed to Mark Zuckerberg and publicly released today, the Senate Banking Committee called upon Facebook to immediately cease its digital currency projects.
- Facebook had released its digital wallet product, Novi, only hours earlier.
- The Committee further called upon Facebook to commit not to bring its Diem cryptocurrency to market.
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Facebook’s Novi wallet launch was met with stiff opposition today from the U.S. Senate Banking Committee, which issued an open letter calling on the company to cease its digital currency initiatives. The news also comes the same day Coinbase announced custody service for Novi.
Pushback from Washington
In a major step for Facebook’s digital currency initiative, the social media giant launched its digital wallet Novi today for users in Guatemala and much of the United States. The move was met with immediate resistance, however, in the form of an open letter to Mark Zuckerberg from the U.S. Senate Banking Committee, which it issued “to voice [the Committee’s] strongest opposition to Facebook’s revived effort to launch a cryptocurrency and digital wallet.”
It is not the first time that Facebook’s digital currency initiatives have hit a congressional wall. In 2019, the development of Facebook’s first flagship cryptocurrency, Libra, was all but stopped in its tracks by a moratorium issued by House Financial Services Committee Chair Maxine Waters. Facebook later began developing a different cryptocurrency, Diem. The Committee, however, expressed concern that Facebook had not sufficiently addressed Congress’ regulatory concerns surrounding Libra before launching yet another digital currency—nor, it alleges, did Facebook wait for regulatory clarity from federal authorities before proceeding with its initiatives, as it had promised to do.
The Committee points out that while Novi’s lead, David Marcus, did attain approval from “nearly every state,” the Committee nevertheless wrote: “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 Committee also expressed concerns over stablecoins more generally in today’s letter, calling plans for payment systems based on stablecoins “incompatible with the actual financial regulatory landscape.” The Senators also expressed doubt regarding Facebook’s ability to properly regulate stablecoins within its ecosystem, writing: “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.”
According to a tweet by Marcus, the Diem stablecoin was not intended to be included in the Novi rollout today. On this point, Marcus emphasized that Facebook only planned to launch Diem and incorporate it with Novi upon regulatory approval.
Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies.
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