Facebook launched a long-awaited pilot of its Novi digital currency wallet in the United States, but opted to use the Paxos Dollar stablecoin after its own cryptocurrency Diem failed to gain support from regulators.
In a blog post on Tuesday, David Marcus, head of Facebook’s Novi portfolio, announced that the company has launched the pilot in parts of the United States, as well as in Guatemala.
Users can download the app on iPhone or Android and register with government-issued ID, Marcus said, adding that transferring money between wallets would be free. Coinbase, the US cryptocurrency exchange, provides custody services to Novi.
Andreessen Horowitz, the venture capitalist, is an investor in both Coinbase and Paxos, and Marc Andreessen, its co-founder, sits on Facebook’s board.
Facebook’s decision to use an existing stablecoin rather than Diem, which Novi was originally designed to hold, reflects the difficulties in getting this latest Facebook-initiated project off the ground.
The industry as a whole has been confronted with questions about consumer protection, money laundering and monetary stability. But regulators have expressed particular concerns about the social media giant hit by the scandal that has been mining its own currency since it announced the initiative in 2019, alongside a group of donors including tech companies and non-profit organizations.
Marcus, also the executive who initially ran Diem, said the company’s support for Diem “has not changed,” adding: “We intend to migrate the wallet to the Diem payment network once that it will have received regulatory approval “.
He also said he intended Novi to be interoperable with other digital wallets in the future.
Stables, which are tied to assets like dollars, have been a vital channel for clients looking to switch from fiat currencies to cryptocurrencies.
But the Financial Stability Board warned in October that a “global stable coin” could “challenge the comprehensiveness and effectiveness of existing approaches to regulation, supervision and supervision.”
Paxos Dollar is the eighth largest stablecoin, according to cryptocurrency data provider CoinGecko. But it is less than 1% of a $ 130 billion industry dominated by market leader Tether, followed by USD Coin, led by Coinbase and payment firm Circle.
Paxos has positioned itself as a more responsible currency and received “preliminary conditional approval” for a US banking charter from the Office of the Comptroller of the Currency in April.
“Paxos paved the way for crypto by creating regulated solutions within established frameworks,” wrote Walter Hessert, chief strategy officer at Paxos, in a blog post.
Marcus said Paxos Dollar was chosen because its reserves are 100% held in cash and cash equivalents, allowing users to easily withdraw money in their local currency.
While Diem was originally looking to create a basket-backed synthetic cryptocurrency and was based in Switzerland, he has since moved to the United States to focus on launching a single-backed stable coin. to a dollar. Its backers are Coinbase and Andreessen Horowitz.