US Senate lawmakers urge Facebook to halt Novi wallet pilot

A group of US senators urged Facebook CEO Mark Zuckerberg to immediately halt the Novi wallet pilot and commit not to bring the Diem stablecoin to market.

In an open letter, Brian Schatz, Sherrod Brown, Richard Blumenthal, Elizabeth Warren and Tina Smith expressed “a firm opposition to Facebook’s renewed push to launch a cryptocurrency and a digital wallet.”

The lawmakers reminded that the company repeatedly pledged not to launch a digital currency without the approval of federal financial regulators.

“Despite these assurances, Facebook is again pursuing plans for a digital currency on a tight timetable and has already launched a pilot for the network’s payments infrastructure, even though this runs counter to the actual financial-regulatory landscape — not only for Diem, but for stablecoins in general,” the lawmakers said.

They noted that obtaining approval to transfer funds in almost every state is not equivalent to a blessing from all U.S. regulators.

Federal agencies are only examining the risks that stablecoins pose to financial stability, and are considering ways to address them, the lawmakers stressed.

Also, they believe Facebook has not provided “satisfactory explanations” about how it will prevent the use of Diem in illicit financial activity.

The senators recalled the recent controversy over the operation of the social network’s algorithms and said that in pursuit of profit the company has shown indifference to the harm its products inflict on consumers.

“You cannot trust Facebook to run a payments system or a digital currency when its current risk-management and consumer-protection capabilities are demonstrably inadequate,” the letter said.

The day before, the company announced the start of pilot testing of the Novi wallet in the United States and Guatemala, using the stablecoin USDP from Paxos. Facebook’s head of payments, David Marcus, again assured that Diem would be launched only after regulatory approval.

In the Diem Association, the organization behind the stablecoin, the association said the pilot is not related to Diem. Lawmakers reminded that Facebook is one of two dozen members of the association and that it is wrong to directly associate it with the digital currency project.

Regarding concerns about the use of the stablecoin in illicit finance, the Diem Association noted that FinCEN gave a positive review of the Diem control system.

Earlier, Marcus suggested that global regulators would remove obstacles to launching the stablecoin in 2021.