Senate Dems urge Facebook to discontinue Novi cryptocurrency project
The Novi pilot, which kicked off Tuesday in the US and Guatemala, allows users to send and receive money abroad instantly, securely and with no fees
A group of five Senate Democrats have penned a letter to Facebook CEO Mark Zuckerberg, urging him to discontinue the tech giant's Novi digital wallet pilot, which allows participants to send and receive money abroad instantly, securely and with no fees.
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The Novi pilot, which kicked off Tuesday in the U.S. and Guatemala, gives participants Paxos Dollars (USDP), which are held on deposit using Coinbase Custody. Novi users are then able to transfer the cryptocurrency into their bank account or withdraw the funds in the local currency of their choosing.
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Though Facebook chose the USDP stablecoin due to its "important regulatory and consumer protection attributes" and reserves that are "fully backed by the U.S. dollar and are held 100% in cash and cash equivalents," the company emphasized that it plans to eventually migrate Novi to the Diem stablecoin once it receives regulatory approval and goes live.
Diem, which was first announced in 2019 under the name Libra, was shelved after facing intense scrutiny from lawmakers and regulators.
"We see great value in the way Diem is designed with robust protections for consumers and controls to combat financial crime," Facebook said in a statement. "The goal for Novi has been and always will be to be interoperable with other digital wallets and we believe a purpose-built blockchain for payments, like Diem, is critical to deliver solutions to the problems people experience with the current payment system."
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In October 2019, Sens. Brian Shatz, D-Hawaii, and Sherrod Brown, D-Calif., wrote to members of the Diem Association’s predecessor, the Libra Association, and expressed concerns about the risks the project posed to consumers and the financial system.
Now, Schatz, Brown and Sens. Richard Blumenthal, D-Conn., Elizabeth Warren, D-Mass., and Tina Smith, D-Minn., have revived those concerns in a letter on Tuesday. They also argue that Facebook "not offered a satisfactory explanation for how Diem will prevent illicit financial flows and other criminal activity."
"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," the letter reads. "We urge you to immediately discontinue your Novi pilot and to commit that you will not bring Diem to market."
The senators said Facebook's decision to pursue a digital currency and payments network is the latest example of the company "moving fast and breaking things" and that it has repeatedly made "conscious business decisions to continue with actions that have harmed its users and the broader society," a reference to explosive allegations made during Facebook whistleblower Frances Haugen's testimony earlier this month.
"We look forward to responding to the Committee’s letter," a Facebook spokesperson told FOX Business.