US Lawmakers Push Back on Facebook’s Novi Wallet Launch

A group of Democrat senators is taking umbrage with a pilot launch involving Novi and Paxos’ USDP stablecoin.

Oct 19, 2021 at 6:50 p.m. UTC
Updated Oct 20, 2021 at 2:43 p.m. UTC

WASHINGTON, D.C. – A group of U.S. lawmakers say Facebook cannot be trusted to launch a digital currency.

In a Tuesday missive, U.S. Senators Brian Schatz (D-Hawaii), Sherrod Brown (D-Ohio), Richard Blumenthal (D-Conn.), Elizabeth Warren (D-Mass.) and Tina Smith (D-Minn.) ordered Facebook CEO Mark Zuckerberg to “immediately discontinue the company’s pilot of Novi” and end its work on the diem stablecoin project.

The lawmakers said Facebook cannot be trusted to protect user data or manage a payments network, in an open letter Tuesday just hours after Facebook announced it was launching a pilot program for its Novi wallet subsidiary in the U.S. and Guatemala.

Under the pilot project, Facebook will let users purchase Paxos dollars (USDP) and custody the funds with Coinbase.

”We urge you to immediately discontinue your Novi pilot and to commit that you will not bring Diem to market,” the lawmakers wrote on Tuesday.

Libra 2.0

The backlash is reminiscent of the response to the original libra announcement. At the time, Facebook unveiled a massive stablecoin vision that drew the ire of lawmakers and regulators around the world, including both the U.S. House of Representatives and the Senate.

Tuesday’s letter referenced the past pushback, and noted that at the time both Zuckerberg and Facebook payments chief David Marcus had committed to not launching until they had secured regulatory approvals.

“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 letter said.

The lawmakers also pointed to Facebook’s other interactions with Congress, including allegations that the company may have misled lawmakers in the past.

Tuesday’s letter also pointed to the fact finance regulators are currently examining the global stablecoin industry, with at least one set of recommendations expected soon from the President’s Working Group on Financial Markets.

“In addition to the risks products like Diem pose to financial stability, you have not offered a satisfactory explanation for how Diem will prevent illicit financial flows and other criminal activity,” they wrote.

After the publication of this article, a Novi spokesperson said, “We look forward to responding to the Committee’s letter.”

UPDATE (Oct. 20, 2021, 04:50 UTC): Adds Novi statement.

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Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.