New York Times — Facebook’s mission is to “bring the world closer
together.”
Increasingly, that is not just about connecting friends and family
to share messages but also serving as a platform for people’s financial lives.
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Some $100 billion in payments have been enabled by
Facebook
over the past year, said David Marcus, who runs the company’s financial
services unit.
But that is just the start of the social network’s ambitions in
the finance industry, Marcus writes in a new memo about the country’s “broken”
payments system.
At the center of Facebook’s push into payments is Novi, a
digital wallet intended for users to move money around the world quickly and
cheaply (free, in many cases).
The company had plans to pair it with a
“stablecoin” cryptocurrency called Libra, but that was shelved amid regulatory
scrutiny, and now the scaled-back project, known as Diem, is overseen by an
outside nonprofit group seeking the necessary government approvals.
In recounting some of Facebook’s setbacks in trying to break
into the crypto payments industry, Marcus describes the tech giant, the subject
of antitrust inquiries around the world, as an underdog.
Facebook faces unfair resistance in the financial industry,
he wrote.
“I’ve heard multiple conversations about how this proposal
would be so great if only Facebook wasn’t involved,” he said.
“I understand and
accept the need for extra scrutiny due to our scale.”
But Marcus describes Facebook as a “challenger in the
payments industry,” with no specific plan yet to monetize use of the Novi
wallet, which will not charge for person-to-person payments, even across
borders.
He added that allowing users to pay with dollars, euros, and
other fiat currencies via the Novi wallet would bring a lot of value.
“So why not just do that and call it a day?” he wrote.
“Well, we might.” But before deciding on that, he does not want to “waste our
shot” at incorporating stablecoins into an “open, interoperable protocol” for
online payments.
“To have the maximum impact, building a closed system using
fiat only wasn’t going to cut it,” he said in the memo.
Crypto advocates say blockchain technology allows for
products that eliminate middlemen, credit checks, and fees and it allows people
excluded from traditional financial services to transact anytime, anywhere.
Marcus said that a well-designed stablecoin pegged to a fiat currency, backed
one-to-one in cash reserves, could offer strong consumer protections. It would
also be quicker to access funds than traditional bank accounts.
In practice, regulators are wary of stablecoins.
An
investigation of the popular stablecoin Tether by the New York Attorney
General’s Office found that the company minted tokens without reserves to back
them.
In recent weeks, crypto tokens have raised concerns from US Treasury
Secretary Janet Yellen, US Securities and Exchange Commission chair Gary
Gensler and US Senator Elizabeth Warren.
Marcus is seeking to allay those concerns.
“We will continue to persevere and demonstrate we can be a
trusted player in this industry,” he wrote, adding that the Novi wallet has
licenses or approvals in nearly every US state and the Diem stablecoin project
“has addressed every legitimate concern.”
Facebook’s digital wallet is ready to come to market, Marcus
said, and “we deserve a fair shot.”
Judging by Facebook’s difficulties getting to this point,
regulators remain to be convinced.
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