A look into Novi, Facebook’s soon-to-be-launched digital wallet

By Gaia Lamperti

Facebook is one step closer to moving into the digital currencies’ world, as David Marcus, the executive of the company’s blockchain unit, announced that the platform is ready to launch its digital wallet Novi.

The digital wallet subsidiary, which Facebook hopes will transform financial services, could play a key role in the global payments system, defined by Marcus as too slow and costly. “We feel that it’s unreasonable to delay delivering the benefits of cheaper, interoperable, more accessible digital payments,” he wrote in a blog post on Wednesday.

The social media giant has secured licenses and approvals for Novi in nearly every state in the US but is still seeking necessary regulatory clearances. “I strongly believe if there was ever a chance to create an open, interoperable protocol for money on the internet and truly change the game for people and businesses around the world, it is now,” Marcus wrote. “Change is long overdue.”

Jack O’Holleran, CEO of SKALE Lab, commenting on the announcement, said: “Facebook’s new digital wallet, Novi, represents probably the first real exposure to cryptocurrencies for consumers on a global scale. Given their experience with creating products that are usable by everyday people, I expect this to create significant movement towards mainstreaming crypto. Not only will the Facebook ecosystem drive acceptance of stablecoins, but it will create a snowball effect, helping pave the way for decentralization and Web 3 as users become comfortable with blockchain tech.”

Facebook’s push into payment so far has been tortuous. The company had plans for a stablecoin (digital currencies pegged to a fiat currency or a currency issued by a central bank) named Libra which would have enabled its 2.4 billion users to make international transactions. Yet, after being introduced in 2019 and expected to go live in 2020, Libra ran into resistance from global regulators. Regulatory concerns over Facebook’s data privacy and potential money laundering issues contributed to the delay of the program.

Now, the coin has been rebranded as Diem, is backed by 26 businesses, and its development is being overseen by a non-profit group seeking governments approvals. The Novi wallet will be closely tied to Diem, allowing users to add money to their wallets and convert it into the digital currency to send it to other users worldwide.

Marcus, who is a former PayPal chief, described Facebook as a “challenger in the payments industry,”  remarking that the company has no plans to monetise the use of the Novi wallet and will not charge for P2P payments, even across borders. He added that the project could run just with fiat currencies and  it would still provide a lot of value offering “cheaper merchant payments to businesses.”

Facebook has not offered further details on the release date but in a time of heightened regulatory scrutiny for stablecoins, after their total value in circulation more than quadrupled this year to $120 billion, the outcome of the project is still uncertain. Diem has already scaled down its intended vision of being a universal currency tied to a basket of sovereign currencies, focusing instead on a single stablecoin backed one-for-one by the US dollar.

In July, Janet Yellen, US Treasury secretary, said recommendations will be issued in the coming months. If Diem will not get off the ground, Novi might have to explore other stablecoin partnerships and, reportedly, it has already held discussions with stablecoin providers Circle and Paxos.