Five U.S. Senate Democrats have called for Facebook to discontinue its crypto projects. The senators addressed a letter to CEO Mark Zuckerberg on Tuesday just hours after the launch of its digital wallet in partnership with Coinbase.
Related Reading | Coinbase To Power Social Giant Facebook’s New Novi Crypto Wallet
Facebook’s new digital wallet Novi is part of a pilot program in the U.S. and Guatemala. The social media giant first announced its plans to enter the crypto industry over two years ago with project Libra. However, after heavy criticism from lawmakers and regulators, the project did not continue. The company later rebranded the Libra project as “Diem,” which is still pending release.
With the launch of Novi, the Senators expressed strong opposition to the project because “Facebook cannot be trusted to manage a payment system or digital currency.”
The two-page letter came from the office of Senator Brian Schatz. Four other senators: Elizabeth Warren, Tina Smith, Richard Blumenthal, and Sherrod Brown, also signed it.
Senators Push Back
On Tuesday, October 19, Facebook published that users in the U.S. and Guatemala can now sign up for the pilot program.
In their letter, the senators highlighted several reasons for their insistence on why the company should halt the crypto projects. Firstly, the fact that Facebook does not care about the harm that its products cause users.
They also referred to 2019, when the company’s Libra project was questioned and ultimately stopped. “In October 2019, Senators Schatz and Brown wrote to members of the Diem Association’s predecessor, the Libra Association, and expressed deep concerns about the risks the project posed to consumers and the financial system. Facebook subsequently shelved Libra amid regulatory scrutiny, but you did not address our concerns before resuming this endeavor.”
Total crypto market at $2.546 Trillion | Source: Crypto Total Market Cap from TradingView.com
Additionally, they pointed out a comment that David Marcus, head of Facebook’s Payments and Financial Services, made in the Tuesday announcement. He said that the company plans to launch Novi with Diem once it receives regulatory approval.
I do want to be clear that our support for Diem hasn’t changed and we intend to launch Novi with Diem once it receives regulatory approval and goes live. We care about interoperability and we want to do it right. 5/8
— David Marcus (@davidmarcus) October 19, 2021
“Despite these assurances, 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.”
The letter further mentioned, “In addition to the risks products like Diem pose to financial stability, you have not offered a satisfactory explanation for how Diem will prevent illicit financial flows and other criminal activity,”
They concluded by urging Facebook to “immediately discontinue your Novi pilot and to commit that you will not bring Diem to market.”
In response to the Senators’ letters, a spokesperson for Novi said, “We look forward to responding to the Committee’s letter.”
Facebook In Trouble With Lawmakers
The senators, in the letter, cited a remark Zuckerberg made in 2019 before the House Financial Services Committee. He said Facebook would not launch a payments system unless U.S. regulators sign off.
At that time, Zuckerberg was referring to Diem, then Libra.
In 2019, lawmakers were skeptical about Zuckerberg’s Libra project. And they dragged him in for a testimony. This hearing took place a year after Facebook’s Cambridge Analytica data scandal.
The recent Novi criticism from lawmakers also hits after a Facebook whistleblower, Frances Haugen, testified before the senate. She reported on how Facebook’s products harm its users.
Featured image from Financial Times, Chart from TradingView.com