Democratic Senators Urge Facebook to Discontinue Novi, Diem Projects

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In Brief
  • A group of Democratic Senators from the US Senate have demanded that Facebook discontinue its Novi wallet pilot project.

  • In a letter addressed to CEO Mark Zuckerberg, the group also asked him to commit not to bring its digital currency Diem to market.

  • The letter highlights Facebook’s recent scandal as one of the primary reasons for the Senators’ opposition.

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A group of Democratic Senators from the US Senate have demanded that Facebook discontinue its Novi wallet pilot project.

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In a letter addressed to CEO Mark Zuckerberg, the group also asked him to commit not to bring its digital currency Diem to market. The list of Democratic Senators includes Brian Schatz, Sherrod Brown, Richard Blumenthal, Tina Smith and perennial crypto skeptic Elizabeth Warren.

The Senators felt Facebook was “pursuing digital currency plans on an aggressive timeline,” despite the fact that “these plans are incompatible with the actual financial regulatory landscape.” They added that this applied not only to Facebook’s projects specifically, but also to stablecoins in general.

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Facebook’s subpar safety standards

The letter highlights Facebook’s recent scandal as one of the primary reasons for the Senators’ opposition. Earlier this month, former Facebook employer Frances Haugen appeared on CBS News to disclose a trove of internal research. According to the whistleblower, Facebook had performed research indicating that its influence was harmful to adolescents, yet chose not to act on it.

“Unfortunately, Facebook’s decision to pursue a digital currency and payments network is just one more example of the company ‘moving fast and breaking things,’” the Senators wrote. “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.”

Novi digital wallet

The letter was composed the day after Facebook announced the Novi pilot project, in association with Paxos and Coinbase. Facebook hoped to address some of the challenges posed by current international payment systems with Novi. 

Ultimately, Facebook’s intent with the digital wallet is to help people securely send and receive money abroad instantaneously, without fees. This is why the pilot project was launched in the United States and Guatemala, to enable those abroad to send home remittances. 

Another purpose of the pilot project will be to test the operational capabilities of Novi systems, such as core features functions, their compliance program and customer care response, according to the head of the project, David Marcus. 

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Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage. He can best be described as an optimistic center-left skeptic.

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