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By Arghyadeep Dutta, 5:00 pm ET:
Facebook Inc on Wednesday said the payments system in the U.S. is “broken”, and the social media giant can fix it with the help of its Diem payment infrastructure.
“Change is long overdue,” David Marcus, the head of Facebook Financials, wrote in a blog post.
Marcus, the former PayPal chief, is leading the social media giant’s blockchain-based payment system and the digital wallet subsidiary since 2018, said its digital wallet named Novi is “ready to come to market.”
“We feel that it’s unreasonable to delay delivering the benefits of cheaper, interoperable, more accessible digital payments,” he wrote.
In June 2019, Facebook announced to launch a stablecoin named Libra but ran into resistance from global regulators citing legal, regulatory, and oversight issues.
The project was then rebranded as Diem in December but has yet to launch.
Currently, 26 companies are listed as members of the Diem association, including Coinbase, Lyft, Shopify, Spotify and Uber. After the Libra controversy, major payment firms Mastercard, Visa, PayPal, Stripe left the association in 2020.
“I’ve repeatedly heard variations of the argument that the payments and financial services industry shouldn’t let Facebook be part of these innovations. I’ve heard multiple conversations about how this proposal would be so great if only Facebook wasn’t involved,” Marcus said, mentioning that Facebook faces unfair resistance in the financial industry.
“I understand and accept the need for extra scrutiny due to our scale.”
In the blog, Marcus wrote that only offering fiat currency within its digital wallet would still provide value. However, he said, “I strongly believe if there was ever a chance to create an open, interoperable protocol for money on the internet and truly change the game for people and businesses around the world, it is now.”
Crypto promoters say blockchain technology eliminates intermediaries, credit checks and fees, allowing people excluded from traditional financial services to transact anytime, anywhere.
Facebook planned to peg its digital currency one to one with a basket of currencies held in reserve, which will make it a ‘stablecoin’, compared to other cryptocurrencies like bitcoin and ether, which are known for price volatility.
However, the 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.
“We will continue to persevere and demonstrate we can be a trusted player in this industry,” Marcus wrote, and mentioned the Novi wallet has approvals in nearly every U.S. 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.”
Picture Credit: FT