Due to the many advantages that blockchain-based fiat currencies offer, the stablecoin market has seen an exponential growth in the past few months. Some senators from the United States opposed Facebook’s Novi cryptocurrency wallet that used Paxos stablecoin. Do they care about user data?
According to its Q2 2021 Report, the social media giant has 2.9 billion monthly active users across its platforms. It tapped Coinbase, Paxos and Bitcoin for its Novi digital wallet project, which began its testing phase in the U.S.A and Guatemala on Oct. 19.
Users in both countries can download the Novi digital wallet app on iOS and Android, and then fund their accounts using a debit card. They can send and receive Pax dollars, which are stablecoins that are pegged to the dollar and issued by Paxos.
Coinbase manages more than $180 billion and will custodian Novi’s funds. Cointelegraph was told by a Facebook spokesperson that the pilot phase is to allow the company’s core functions to be evaluated and demonstrate operational capabilities.
The spokesperson also stated that the company is still supporting the permissionless payment system called Diem network, but has suspended support and is waiting for approval from Washington. Facebook will launch Novi with Diem after receiving regulatory approval.
Stablecoins for the masses
Facebook’s Novi digital wallet and its use by a central entity to custodian a stablecoin may be against the cryptocurrency space’s ethos. However, it could help to move blockchain technology back-end and allow billions to use it every single day without even knowing.
Cointelegraph spoke with Justin Hartzman, CEO at CoinSmart, a Toronto-based cryptocurrency exchange. He said that he believes Novi’s launch is a “definitely major step towards mainstream acceptance” of cryptocurrencies due to the large user base of Facebook.
Hartzman stated that users will not be able to hold their coins directly after Novi’s launch but instead will “keep track” of their USDP balances while they’re held in custody at Coinbase.
Sergey Zhdanov is the chief operating officer at EXMO, the UK-based cryptocurrency exchange. He said that the Novi project has potential benefits.
“Not to mention that stablecoins can often be the only option for sending and receiving money in undeveloped countries.”
Zhdanov stated that stablecoins could become the foundation for faster and cheaper payments. This will only occur if stablecoins don’t get “stifled” by excessive regulation.
Facebook’s initial cryptocurrency plans, which included launching a coin that was backed by a variety of fiat currencies, have been rebuffed by regulators. Over a year after its initial announcement, the project changed course with a complete rebranding from Libra to Diem.
Five senators demanded that the Novi wallet pilot be closed immediately after Facebook launched it. Five senators sent a letter to Mark Zuckerberg (Facebook’s CEO and founder) stating that they had “strongest objection” to Facebook’s renewed effort to launch a digital wallet and cryptocurrency.
The letter was sent from Senator Brian Schatz’s office and was signed by senators Tina Smith and Richard Blumenthal as well as Sherrod Brown, who is also chair of the Banking Committee, and Elizabeth Warren.
Diem responded by telling regulators that it was an independent organization and that “Diem isn’t Facebook.” We are an independent organisation, and Facebook’s Novi does not belong to the Diem Association. Novi’s pilot project with Paxos was not related to Diem.
Zhdanov said that Facebook might not be able to accept the request and disconnect their wallet because global regulators saw Libra as a threat.
“It would be odd to imagine that the United States would readily agree to redirect large cash flows to private companies with a huge audience.”
According to the CEO, he believes large industry players will “be able to influence what’s happening and will not allow the largest portion of the cryptocurrency market to die,” referring specifically to stablecoins.
Hartzman of CoinSmart says that regulators are focusing on Facebook’s past and not its involvement in stablecoins or the cryptocurrency sector. Hartzman believes that even if Facebook succumbs to the pressure and shelves Novi it will not have a significant impact on the wider crypto market.
Shift to metaverse
Cointelegraph spoke with Kay Khemani, CEO of trading platform Spectre.ai Kay Khemani, who revealed something more than what Facebook initially announced: The company’s rebrand will not be focused on social media but the metaverse.
Although the metaverse is not defined in any way, it is often referred to as a digital reality that combines elements of social media, online gaming, and augmented reality. According to sources at Facebook, the company is planning to announce a new brand to reflect its shifting priorities towards the metaverse.
According to The Verge, this move signals that the company is focusing on something else than social media. Mark Zuckerberg said that the metaverse would be a major focus for Facebook because he believes it will “just be a big part” of the next chapter in the evolution of the internet after the mobile web.
Khemani stated that Facebook is an innovator that “changes the paradigms” and could be a market leader by having Oculus, the premier virtual reality hardware manufacturer, and the largest number of social media users.
These two factors could combine to make Facebook a major player within the metaverse. U.S. regulators may not be as lenient in order to prevent Facebook from “potentially relocating its operations out of the USA,” Khemani stated. This would cause a exodus from tech companies that would “undoubtedly hurt the U.S. economy.”
Facebook seems to be moving ahead with its cryptocurrency wallet Novi as well as its stablecoin project Diem. If Facebook can make blockchain technology invisible, it may launch a cryptocurrency app that is adopted by billions.
Facebook already works with Paxos and Coinbase, so it’s not unreasonable to think Novi could offer seamless access to other cryptocurrency, including Bitcoin (BTC), in the future. However, veteran crypto users might choose to remain away as maintaining their private keys is crucial.