Facebook’s Novi Crypto Wallet is Gearing up For a Highly Anticipated Launch

Facebook prepares to launch Novi but publicly commits to meeting regulatory approval first, despite it being anathema to their business model.

By
Chung Yee
on
August 20, 2021
Category:
Blockchain News

Much Awaited Launch

Facebook announced that its Novi crypto wallet is ready to come to the market. The long-awaited cryptocurrency project by Facebook will feature Novi, a stablecoin wallet integrated into its Facebook application.

Novi is a name taken from the Latin words ‘Novus’ and ‘via,’ which means ‘new’ and ‘way’ respectively, as Facebook plans to pave the way to transform a broken payment infrastructure. David Marcus, the lead for Facebook’s cryptocurrency project, also confirmed the wallet would be regulated.

In the August 18th Medium post by Marcus, he wrote that ‘stablecoins in and of themselves don’t solve any problems. To unlock their potential, they need to be combined with an underlying payments network that’s cheaper, faster, safer, interoperable and programmable.’

The anticipation has been building up since the social media giant announced its foray into the cryptocurrency space in June 2019. The project was initially named Libra but subsequently changed its name to Diem after facing strong regulatory opposition. In a letter to Mark Zuckerberg in 2019, the US Senate outlined their concerns on privacy rights. 

Source: The Senate Banking Committee raised issues on privacy rights on financial and consumer information that Facebook may have access  


The Formula for Change

The current payment system has left many behind. They are unbanked and the underbanked. 6% of Americans are unbanked and 16% of Americans are underbanked according to a report on economic well-being by the Federal Reserve. Current cross-border payment is slow and costly. The inflated costs are often passed down to the consumer. 

‘The global average cost of a remittance remains a painfully high 6.5%. That’s more than double the 3% target identified as a Sustainable Development Goal by the United Nations,’ according to a blog post by Worldbank.org.
Source: Costs of sending remittance using the traditional solution is high 

The Novi wallet aims to resolve this by enabling people and eventually small businesses, to move money around domestically and internationally in a quick and affordable way. This is only part of the solution. 

Facebook plans to use stablecoins and David Marcus alludes to how they can be a solution to an antiquated system. Stablecoin's can be designed and managed to be an open interoperable protocol for money on the internet. 

A stablecoin can be designed to be transparent to both the consumer and regulator. It will enhance consumer protection and incorporate compliance features. The risk of unbacked assets will not arise if the stablecoin holds 1:1 reserves in cash in US banks and the issuer’s holding capital as a buffer. 

Implementation of Controls

In arguing the case for a stablecoin, anti-money laundering, counter-terrorist financing, sanctions and tax compliance can be implemented into the design of the coin. The wallet and the coin are two main control features that can help the authorities identify and track illicit activities. The common misconception that digital assets are anonymous can be debunked. 

Source: Facebook aspires to fix a broken payment system that is slow, costly, and not interconnected

Facebook’s Hidden Motives? 

The skepticism that existed in 2019 still exists today. Facebook has a negative image. People question Facebook’s involvement with payment and financial services. Facebook doesn’t like it when the narrative switches from data to privacy. 

David tries to quell concerns by making the following points: 

  1. Diem Association has become an independent entity, conducting its own dialogue with US and global regulators. 
  2. Facebook has been an active player in the payment industry since 2009 and has enabled more than $100 billion in payment volume in the last four quarters. 
  3. Any person or company with a solid solution should be given a fair shot.  
  4. Despite Facebook global reach, its users still make an affirmative choice to use the Novi wallet and is still subject to a strict customer due diligence 

Freedom of Choice

It is undeniable that Facebook is better positioned to take advantage of its global reach. The payment solution offered by the company may not be entirely altruistic but if it provides a better solution than what is presently offered, it is worth a shot. There are legitimate concerns about users’ privacy. 

Better expect an all-out front from Facebook as privacy and data control is where they make their money. Proper regulatory controls and data privacy laws would apply to Facebook as much as it applies to banking and financial institutions. Eventually, the users have a choice whether they wish to adopt the solution offered. 


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Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance. His largest crypto holdings are Solana, Ethereum, and BNB Token.

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