Facebook's Efforts to Salvage Its Ambitious Cryptocurrency Project Are Well Underway

By Mariliana Fotopoulou Tuesday, December 22, 2020

The much-anticipated cryptocurrency projects cooked in the Facebook lab, “Diem” and “Novi,” are likely to be launched next year, according to the company’s head of financial services, David Marcus.

Rebranding Efforts Underway

Marcus said the social media company is expected to receive the “benefit of the doubt” from regulators in its efforts to roll out its cryptocurrency “Novi” and digital wallet “Diem.”

“I hope that we get to participate with … Novi and Diem and the big changes of 2021, pending regulatory approvals where we need to obtain them,” he said when asked about the most significant changes in the financial services sector next year.

Facebook’s cryptocurrency project Diem amended its strategy and said it plans to deliver a number of stable coins supported by a single nation’s currency instead of rolling out a single coin backed by a number of currencies.

“The Diem project will provide a simple platform for fintech innovation to thrive and enable consumers and businesses to conduct instantaneous, low-cost, highly secure transactions,” Stuart Levey, Diem Association CEO, said in a press release.

Earlier this month, Libra Association changed its name to Diem to follow the change of the digital wallet from “Calibra” to “Novi.” According to media reports from November, Diem Association is expecting to roll out its digital asset in January.

Scrutinized Project

Facebook has put up with huge challenges since it announced its plan to roll out a cryptocurrency last year, which resulted in diminished ambitions and a rebrand.

The initial plan included launching a cryptocurrency named Libra, which was supposed to be governed by a non-profit association composed of a number of companies under the name of Libra Association.

Facebook also wanted to roll out a digital wallet, Calibra, that would let users transfer Libra between each other. The social media giant planned to back one Libra coin with a group of other currencies.

However, regulators unleashed a barrage of criticism at the social media company over Libra’s potential negative impact on financial stability as well as money laundering and data privacy issues that could emerge.

Last year, Facebook announced its plan to launch Libra in an effort to change the methods in which money is transferred worldwide.

“We’ve seen the internet change the game for everything that could be digitized, except for money,” David Marcus, the head of Facebook’s Calibra unit, said at the time.

In Libra whitepaper released a year ago, the company explained that the coin wouldn’t be controlled by Facebook but rather by a number of companies and institutions that together create a non-profit consortium.

However, shortly after Facebook announced its ambitions to launch Libra, global regulators voiced their concerns that the coin could substantially hurt the global financial system.

At that time, Benoit Coeure, a board member at the European Central Bank, said that digital currencies such as Libra could challenge the supremacy of the US dollar.

“Global ‘stablecoin’ initiatives can make international payments cheaper and faster and support financial inclusion. But they raise formidable challenges across a broad range of policy domains: operational robustness, safety and soundness as payment systems, customer protection, risks to financial stability and monetary sovereignty, and, last but not least, data protection and compliance with anti-money laundering and terrorism financing rules.”

The main difference between Diem and other cryptocurrencies like Bitcoin and Ethereum is that Diem is supported by a government currency. In other words, coins issued by Diem Association would serve as the equivalent value of the US dollar or Euro.

Novi will require users to confirm their identity using a government-issued ID, and the wallet will also include built-in features against fraud. Facebook plans to roll out the initial version of Novi in only a couple of countries where it has obtained the necessary licenses and authorization, Facebook said.

Through Novi, users will be able to send each other money via Facebook Messenger, WhatsApp, or other applications.

Summary

Facebook’s top executive said the company should be provided with a “benefit of the doubt” from regulators as it prepares to launch its digital currency and wallet Diem and Novi.

The social company said it expects to roll out these two products in 2021. Before Facebook changed their names in a major rebranding effort, Diem and Novi were named Libra and Calibra, respectively.

About the Author


Headshot for author Mariliana Fotopoulou

Mariliana has an MSC in consumer analytics and business strategy. She has a special interest in fast-moving industries and big data.

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