Diem tells Senators on the warpath over Novi: We're not actually Facebook

Diem tells Senators on the warpath over Novi: We're not actually Facebook

Stablecoin project Diem has distanced itself from its Facebook in response to Democrat Senators calling for the immediate cessation of the firm’s Novi crypto wallet.

Diem also claimed senior regulators had called it “the best-designed stablecoin project that the U.S. government had seen.”

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In an Oct. 19 letter sent to Facebook CEO Mark Zuckerberg, the Senators including crypto critic Elizabeth Warren, voiced their “strongest opposition to Facebook’s revived effort to launch a cryptocurrency and digital wallet.”

Earlier that day the Novi wallet was launched in partnership with Coinbase, with a pilot in the U.S. and Guatemala to enable users to buy, send and receive Pax Dollars (USDP) through their Novi account.

Diem’s response to the letter stated the Senators had misunderstood the “relationship between Diem and Facebook,” while also distancing itself from the Novi wallet pilot:

“Diem is not Facebook. We are an independent organization, and Facebook’s Novi is just one of more than two dozen members of the Diem Association. Novi’s pilot with Paxos is unrelated to Diem.”

While technically true, the argument may not be enough to squash the concerns of the U.S. Senators.

Diem was formerly known as Libra and has strong ties to the social media giant, as the stablecoin project was initially proposed by Facebook in 2017, and Facebook’s Financial Head David Marcus is also the co-founder and a board member of Diem.

In their letter, the Senators asserted that Facebook “cannot be trusted” as the firm has made several moves that ultimately “harmed its users and the broader society.” It also said there has not been “a satisfactory explanation for how Diem will prevent illicit financial flows and other criminal activity.”

Related: Top engineers working on Facebook’s wallet jump ship to A16z’s crypto fund

Diem defended itself by claiming it has the “most robust controls in the industry.”

“Beyond financial crime compliance, we engaged extensively with an inter-agency regulatory team about the design of the project. As part of that review, we made adjustments to reflect feedback we received, and we were informed by a senior regulator that Diem is the best-designed stablecoin project that the U.S. government had seen,” Diem said.

Diem concluded by saying that when the stablecoin project finally launches, it will do so with “confidence that Diem’s payment system is secure, will protect consumers, and will combat financial crime.”

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