KEY POINTS

  • Facebook's new crypto wallet was launched for users in U.S. and Guatemala
  • Dem. senators view the launch as "company 'moving fast and breaking things'"
  • The social media giant has plans within digital space alongside crypto space

Democratic senators say they don't trust Facebook with digital currency and urged the social media giant to stop the launch of Novi wallet.

A scathing letter from Democratic senators came just hours after Facebook launched Novi, its new crypto wallet for users in the United States and Guatemala, on Tuesday. Democratic senators  called on the social media  giant's founder and CEO, Mark Zuckerberg to stop the launch.

The two webpage letter originated from the office of Sen. Brian Schatz  and was signed by fellow senators  Elizabeth Warren, D-Mass, Tina Smith, Richard Blumenthal and Sherrod Brown.

With the launch, Facebook reported that users in the United States and Guatemala can now sign up for the pilot program. With Novi, standalone software like Instagram and WhatsApp, users can transfer money abroad instantly and at no cost. In addition, Novi users will transact in Paxos dollar or USDP, a stablecoin created in 2018, the value of which is indexed to the U.S. greenback.

The Democratic senators, however, are not convinced that Facebook's move is in the best interest of its users.  "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," the letter said.

"On several occasions, Facebook has pledged not to launch digital currency without the approval of federal financial regulators," Senators said, citing a remark made by Zuckerberg in 2019 to the Property Money Products and Services Committee.

The Facebook CEO, in 2019, had  said he would not be launching a payment system unless U.S. regulators approve it. Zuckerberg was referring to Diem, a blockchain-based payment system from Facebook, formerly known as Libra.

The project was eventually jettisoned after a series of congressional hearings the same year.

"Facebook’s decision to pursue a digital currency  and payments network is just one more example of the company 'moving  fast and breaking things' (and in too many cases, misleading Congress in order to do so). Time and again, Facebook has made conscious business decisions to continue with actions that have harmed its users and the broader society," the letter stated.

The Democrats also highlighted David Marcus' comment during the product unveiling. Marcus, the co-creator  of Novi, said his team "will not get started without a proper regulatory framework." The risks that come with it are still being discussed in the Senate, the letter stated.

"In addition to the risks that products like Diem present to financial stability, you have failed to provide a satisfactory explanation of how Diem will prevent illicit financial flows and other criminal activity," the senators said.

At the beginning  of the letter, senators pointed out what they see as adverse effects on society due to its "relentless pursuit of income at the expense of its users."

In response, a Novi spokesperson said, "We look forward to responding to the Committee's letter."

Facebook has far loftier plans than only a crypto wallet and stablecoin within the digital space. For example, on Oct. 17, Facebook shared goals to create 10,000 high-skilled jobs within the EU to build its metaverse over the following five years.

Senators pressure Facebook to 'immediately discontinue' Novi wallet pilot Facebook CEO Mark Zuckerberg has been a leading voice in Silicon Valley hype around the idea of the metaverse, which would blur the lines between the physical world and the digital one Photo: AFP / Kirill KUDRYAVTSEV