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Senators call on Facebook to shelve Novi cryptocurrency project

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7 months ago

Senate Democrats urged Facebook to stop its digital wallet and cryptocurrency project in a letter to company CEO Mark Zuckerberg on Tuesday, saying that the company "cannot be trusted to manage cryptocurrency."

The letter came hours after Facebook launched Novi, a new digital wallet, as part of a "small" pilot program in the U.S. and Guatemala. Facebook first announced its plans to enter the cryptocurrency industry more than two years ago, but a digital currency project called Libra was halted after harsh criticism from lawmakers and regulators. Libra currency was later rebranded to "Diem," which has yet to be released along with the new wallet.

In their letter, Sens. Brian Schatz (D-HI), Sherrod Brown (D-OH), Elizabeth Warren (D-MA) and others wrote, "Facebook is again pursuing plans to create a digital currency in an aggressive timeline and has already launched a payment infrastructure network pilot, though these plans are incompatible with the real financial regulatory landscape - not just for Diem in particular, but for Stablecoin in general."

In a statement to The Verge on Tuesday, a Novi spokesperson said: "We look forward to responding to the Committee's letter."

With no currency of its own, Facebook's Novi wallet will allow users to send and receive money using Paxos Stablecoin in partnership with Coinbase. Coinbase is acting as a custodial partner, storing the real funds involved in the pilot program. In a statement released Tuesday, David Marcus, head of Facebook F2 (Facebook Financial), said the company still plans to launch Novi with Diem "once it has regulatory approval and is up and running."

In 2019, the House and Senate invited Zuckerberg to testify on the Libra project after weeks of negotiations with lawmakers who were mostly skeptical of Facebook's project. The hearing came just a year after the Cambridge Analytica scandal involving Facebook, and lawmakers questioned the company's credibility in light of that scandal.

In a letter published Tuesday, the senators expressed the same concerns. "Facebook cannot be trusted to manage a payment system or digital currency when existing risk management and consumer safety capabilities have proven to be wholly inadequate," they wrote. "We urge you to immediately stop piloting Novi and promise you will not bring Diem to market."

Earlier this month, Facebook whistleblower Francis Haugen appeared before the Senate Commerce Committee to testify about the harm Facebook and its other products can do to users. Republicans and Democrats shared concerns about how platforms like Instagram can harm teens, and Haugen's testimony has already met legislative proposals to regulate the company.

THE GOVERNMENT AND THE SENATE ARE GIVING ZUCKENBERG A HARD TIME. I SUSPECT THEY WILL SOON TAKE ON INSTAGRAM.

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