Meta Novi Limited Launch

With extensive experience as an electrical/software/coding engineer along with having a diverse financial background, Thomas Wettermann’s areas of interest include Machine Learning (ML), artificial intelligence (AI), and Financial Technology (FinTech). For the past few years, Thomas Wettermann has focused on the underlying technologies that support and promote all phases of cryptocurrency, Web 3.0, and metaverse ecosystems.

David Marcus, Head of Libra: Getty Images

Since May 2019, Facebook has been desperately trying to get its own cryptocurrency after it first floated ideas for a “Global Coin” or “Facebook Coin.” Then, in June of 2019, Facebook formally announced its “Libra” cryptocurrency project.

But now after three years of regulatory and legislative scrutiny, multiple rebranding efforts, and an exodus of key crypto executives, it appears that Facebook (now Meta) faces major obstacles in introducing its cryptocurrency.

Libra: The Coin

In June 2019, Facebook released its first Whitepaper detailing its proposed world cryptocurrency called “Libra.” One of the main problems Libra seeks to address is how much it costs for individuals in developing countries to move money. In these developing countries, individuals often pay exorbitant transfer charges.

Libra was conceived to be a cryptocurrency that could be used anywhere in the world with a goal to foster more access to “better, cheaper, and open financial services.” With Libra, consumers could send money to each other as well as pay for goods and services using the Facebook-backed digital currency instead of their local currency.

Facebook’s Libra

According to the original Whitepaper, Libra tokens were to be monitored and kept track of by the not-for-profit organization Libra Association. The association guarantees that Libra is financially backed by several global currencies and securities. This basket of securities was originally to include the following mix: 50% United States dollar, 18% Euro, 14% Japanese yen, 11% Pound sterling, and 7% Singapore dollar.

It was believed that such a mix would bring price stability to Libra.

Calibra: The Digital Wallet

Libra needed a digital wallet to purchase, hold, and manage these tokens. To manage Libra, users would be able to download a digital wallet named Calibra. This wallet was intended to allow users to send this global coin to anyone with a smartphone. By 2020, Facebook had wanted the Calibra wallet to be available in Messenger, WhatsApp, and as a standalone application. The Facebook Whitepaper stated that “almost anybody” in the world with a smartphone will be able to download the digital wallet app. As the world’s largest media platform, Facebook had about 2.5 billion users in 2020.

Legislative and Regulatory Headwinds

Opposition to Facebook’s proposed global Libra cryptocurrency initiative was swift. For example, the very same day that the Libra Whitepaper went live, Congresswoman Maxine Waters, (D-CA) Financial Services Committee Chairwoman issued a letter demanding that Facebook “agree to a moratorium on any movement towards creating a cryptocurrency.” Waters cited Facebook’s frequent abuse of privacy data as the basis for this moratorium.

This letter also requested that Facebook executives be called before Congress to provide testimony on these issues. Two weeks later on July 2, 2019, lawmakers went on a further offensive. US lawmakers sent Facebook a letter stating that “it is imperative that Facebook and its partners immediately cease implementation plans” for Libra and its related digital wallet.

One week later while testifying before Congress, Jerome Powell, chairman of the Federal Reserve, testified that the Fed had "serious concerns" as to how Libra would deal with "money laundering, consumer protection and financial stability." Libra “cannot go forward,” Powell testified, unless all legal and regulatory issues have been fully resolved.

In response to this initial Congressional and regulatory pushback, Facebook’s then chief of the Libra project David Marcus testified that Facebook would not launch the Libra currency until Facebook had “fully addressed regulatory concerns and received appropriate approvals.”

Not only did Libra receive immediate pushback in the US but it also received condemnations from European regulators. For example, French Finance Minister Bruno Le Maire stated that Libra represented an "unacceptable" challenge to state sovereignty and he also suggested political motives were behind Facebook’s project.

Le Maire has previously said France would prevent Libra’s use in the EU. Germany's finance minister, Olaf Scholz agreed. Both countries eventually issued a joint statement affirming that “no private entity can claim monetary power, which is inherent to the sovereignty of nations.”

Faced with growing domestic and international regulatory resistance, some of the early Libra Association participants withdrew from the Libra Association. For example, by October 2019 companies leaving the Libra Association included: PayPal, eBay, Mastercard, Stripe, Visa, Mercado Pago, and Booking Holdings.

Meta Novi Introduction

In mid-October, Facebook (as it was still then called) announced a limited launch of its digital Novi wallet. Limited to 200,000 users, the launch was part of the Novi wallet pilot program focusing on the remittance market between the US and Guatemala.

In partnership with Coinbase, the pilot program allowed Novi users to securely and instantly send and receive money. Rather than use its own cryptocurrency Diem, Novi uses the Paxos Dollar (PAX) which is a stablecoin. The Paxos Dollar is structured on the Ethereum (ETH) blockchain and is pegged to the US dollar. Importantly, Paxos is regulated by the New York State Department of Financial Services.

Senators’ Responsive Letter to Zuckerberg

US legislators were not too happy with the US Novi limited introduction and they were quick to condemn Facebook’s actions. US legislators sent Facebook CEO Zuckerberg a letter only hours after Facebook launched Novi.

In their letter, Sens. Brian Schatz (D-HI), Sherrod Brown (D-OH), Elizabeth Warren (D-MA), and others wrote, “Facebook is once again pursuing digital currency plans on an aggressive timeline and has already launched a pilot for a payments infrastructure network, even though these plans are incompatible with the actual financial regulatory landscape - not only for Diem specifically but also for stablecoins in general.”

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