Facebook has once again gone to Washington, this time in a redoubled effort to bring their rebranded virtual wallet, Novi, and its recast cryptocurrency, Diem, to the global marketplace.
The Washington Post reported Wednesday that top company officials were appealing directly to US legislators in an effort to roll out the new features, which have been plagued by concerns about their specific potential for pitfalls as well as general repugnance toward the ever-extending reach of Facebook. In June of 2019, the prior iteration of Diem, known as Libra, was met with resistance from regulators in both the political and financial spheres. After an ultimately scrapped effort to obtain licensing in Switzerland, Diem has relocated its operations to the United States and appeared to have settled on its Stablecoin being backed by the US dollar. The renamed, rescaled and refined Diem offering has obtained licesning in most individual states, but still provoked reluctance among some federal policymakers.
“Facebook’s second attempt to launch its digital currency as federal regulators and advocates are warning us about the many ways stablecoin schemes threaten workers’ paychecks and the stability of our financial system is deeply troubling,” Alysa James, a spokeswoman for Sen. Sherrod Brown (D-Ohio), told The Post. "This product is good for Facebook's executives and that's all they care about."
Facebook already manages tens of billions of dollars in payments each year, and Novi, the virtual wallet, would also allow users to exchange fiat currency such as US dollars and Euros. But a proprietary currency that could be used universally--with the likely immediate exception of China where Facebook has become persona non grata--would level the playing the field for typically under-served countries in the banking community, largely located in the developing world.
A platform like Pay Pal, for instance, has existed for decades and has taken time to establish a global reach. Disparate terms and conditions; unwieldy exchange rates and cumbersome fees; and other obstacles fettered the freeflowing exchange of payments, goods and services that the United States has enjoyed since the service's inception. Internationally oriented subsidaries, like Xoom and the very recently acquired Paidy, should continue to help close those gaps. Facebook hopes to obviate them altogether.
“To have the maximum impact, building a closed system using fiat only wasn’t going to cut it,” read a memo earlier this year from David Marcus, the head of Facebook's financial services. Marcus will be at the center of discussions in Washington, attempting to attain for Diem the approval that Libra could not secure.
Concerns over privacy and competition, pertaining specifically to Facebook's market position, as well as general worries that a Stablecoin so commonly used could spur the destabilisation of fiat currencies and enable money launderers, continue to hinder support for Diem much as they did for Libra.
Facebook has attempted to assuage such fears by opening their platform to competitors through its 26-member Diem Coalition and assuring that Facebook users will have to opt in to use of the digital wallet, Novi, which Marcus has said will launch this year. In order to earn a green light for Diem's debut, Marcus said in an interview with Technology 202 last week that even he recognizes that a persuasive case must be made and fences need to be mended between Facebook and regulators.
“We have a lot to prove in terms of our ability to earn people’s trust over a very long period of time,” Marcus said.