US legislators condemn Facebook’s digital wallet project

“Facebook cannot be trusted to manage a payment system or digital currency”

A number of prominent US lawmakers have once again voiced their opposition to Facebook’s digital currency ambitions after the American tech giant announced a pilot programme for its Novi digital wallet.

On Tuesday, Facebook said that the project will go live in the US and Guatemala. Users will be able to trade the Paxos Dollar (USDP), a stablecoin pegged to the US dollar, with cryptocurrency exchange Coinbase providing custody services. 

Rapid reaction from Democratic lawmakers

In a letter to Facebook Chairman and CEO Mark Zuckerberg, a number of prominent Democratic senators expressed their concern that the trial was the first step on a path that would ultimately result in Facebook launching its Diem stablecoin. 

The project, which will create a digital currency backed by a basket of fiat currencies, has come under repeated criticism from US regulators and lawmakers since its inception as Libra in 2019. 

Indeed, the prospect of a new medium of exchange developed by the world’s largest social media company in conjunction with a slew of other prominent corporations provoked the ire of many politicians around the world. 

Following the project’s initial announcement, the finance ministers of France and Germany famously issued a statement, vowing that “no private entity can claim monetary power, which is inherent to the sovereignty of nations.” 

Diem in the crosshairs

Despite rebranding as Diem, hiring a number of executives from the world of traditional finance and attempting to work – rather than compete – with nation states, the endeavour still faces stiff opposition. 

Although the Novi pilot will launch without Diem, Democratic lawmakers, including prominent senators Elizabeth Warren and Richard Blumenthal, accused Facebook of “once again pursuing digital currency plans on an aggressive timeline… even though these plans are incompatible with the actual financial regulatory landscape.”

Urging the technology giant to “immediately discontinue” the pilot and promise that it will not bring Diem to market, the senators stated: 

“Time and again, Facebook has made conscious business decisions to continue with actions that have harmed its users and the broader society. 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.”

Responding to the senator’s rapid response, the Diem Association maintained

“Diem is not Facebook. We are an independent organisation, and Facebook’s Novi is just one of more than two dozen members of the Diem Association. Novi’s pilot with Paxos is unrelated to Diem.”

Further reading: FTSE falls as Bank of England signals interest rate hike

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