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US senators urge Facebook to discontinue crypto wallet pilot

US senators urge Facebook to discontinue crypto wallet pilot

Last updated 29th Jun 2022
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Five US senators have written a letter to Facebook CEO and founder Mark Zuckerberg beseeching him to suspend the company’s cryptocurrency plans. The lawmakers stated that the company couldn’t be trusted in managing crypto due to its insufficiency in risk management and keeping consumers safe.

This letter was sent out following the launch of Facebook’s new digital wallet, Novi, in a “small pilot.” Coinbase, a Nasdaq-listed digital currency exchange, has been selected by Facebook as its pilot custody partner.

Coinbase base stated that the active Novi users could get USDP through their Novi account, deposited with Coinbase Custody. In this case, it will be possible to transfer USDP among Novi users instantly.

What’s in the letter?

In their letter, the senators voiced their bold opposition to the company’s reestablished plans to start a cryptocurrency and digital wallet dubbed Diem and Novi, respectively.

According to lawmakers, US regulators are still looking into stablecoins and researching their risks and how to deal with them. With this regard, Facebook shouldn’t be hasty in launching Diem.

The letter also stated that Diem poses financial stability risks. In addition, the Facebook CEO and his team haven’t given adequate answers on how Diem will curb unlawful financial flows and other criminal activities. 

As the letter continued, Facebook’s decision to pursue cryptocurrency and payments networks was described as “moving fast and breaking things” to mislead Congress. Additionally, the company was criticized for making decisions that resulted in harm to its customers and society.

Toward the end of the letter, Mark was instructed to immediately suspend the Novi pilot and not to bring Diem to market.

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Diem responds to the letter

Diem criticized the lawmakers for misunderstanding their relationship with Facebook. It explained that it is an independent organization, and that Novi is just a member of the Diem Association. Furthermore, the pilot that Novi conducted with Paxos is unconnected with Diem.

Diem further condemned statements by senators that claimed it hasn’t shown how it could prevent unlawful transactions. It revealed that Treasury was okay with its financial crime compliance network.

The association termed its financial network as the industry’s most comprehensive and reliable system. Additionally, the network doesn’t allow anonymous transactions with unlisted wallets until they can be adequately screened for illicit finance risks.

Lastly, Diem promised that its payments system would increase security, consumer protection and curb financial crime when the stablecoin project launches.

Walter Akolo

Walter Akolo

Walter is a writer from Nairobi, Kenya. He covers the latest news on the cryptocurrency market and blockchain industry. Walter has a decade of experience as a writer.