Senators call on Facebook to shelve Novi cryptocurrency project

The Verge - Tue Oct 19 19:32

Senate Democrats called on Facebook to end its digital wallet and cryptocurrency project in a letter to chief executive Mark Zuckerberg Tuesday, saying that the company “cannot be trusted to manage cryptocurrency.”

The letter comes hours after Facebook launched Novi, a new digital wallet, as part of a “small” pilot program in the US and Guatemala. Facebook first announced its plans to enter the cryptocurrency industry over two years ago, but the digital currency project, called Libra, was halted after heavy criticism from lawmakers and regulators. The Libra currency was later rebranded as “Diem,” which has yet to be released alongside the new wallet product.

In their letter, Sens. Brian Schatz (D-HI), Sherrod Brown (D-OH), Elizabeth Warren (D-MA), and others wrote, “Facebook is once again pursuing digital currency plans on an aggressive timeline and has already launched a pilot for a payments infrastructure network, even though these plans are incompatible with the actual financial regulatory landscape — not only for Diem specifically, but also for stablecoins in general.”

Facebook did not immediately respond to a request for comment from The Verge.

Without its own currency, Facebook’s Novi wallet will allow users to send and receive money using the Paxos stablecoin in a partnership with Coinbase. Coinbase serves as the custody partner, holding the actual funds involved with the pilot program. In a statement issued Tuesday, Facebook’s David Marcus, head of F2 (Facebook Financial), said that the company still plans to launch Novi with Diem “once it receives regulatory approval and goes live.”

In 2019, the House and Senate hauled Zuckerberg in to provide testimony on the Libra project after weeks of back and forth with lawmakers who were largely skeptical of Facebook’s project. The hearing came only a year after Facebook’s Cambridge Analytica scandal, and lawmakers questioned the company’s credibility in light of it.

In Tuesday’s letter, the senators invoked these same concerns. “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,” they wrote. “We urge you to immediately discontinue your Novi pilot and to commit that you will not bring Diem to market.”

Earlier this month, Facebook whistleblower Frances Haugen came before the Senate Commerce Committee to testify on the harms Facebook and its other products can inflict on users. Republicans and Democrats shared concerns over how platforms like Instagram could hurt teenagers, and Haugen’s testimony has already been met with legislative proposals to regulate the company.

The Novi criticism from lawmakers also arrives as Facebook is bracing itself for more disclosures from Haugen, according to a Monday Facebook Newsroom tweet.