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Facebook's Marcus demands 'fair shot' for Novi payments

Facebook's Marcus demands 'fair shot' for Novi payments

Facebook's digital wallet, Novi, could abandon the Diem stablecoin in favour of fiat money if regulators do not change their tune, says chief David Marcus in a blog in which he also confirms plans to move into other financial services.

Over the course of 2500 words, Marcus offers an impassioned case for Novi, Diem and their ability to change payments, particularly for the unbanked, while also railing against regulators and defending Facebook as a force for good and a payments sector underdog.

The Diem project has faced a series of setbacks and stiff opposition from financial regulators since it was first unveiled two years ago under the Libra name.

The current iteration of the project involves the issue of a single stablecoin pegged to the US dollar, a significant scaling back from recently revised plans to issue a series of stablecoins backed by individual traditional currencies, as well as a token based on the currency-pegged stablecoins.

In May it abandoned efforts to gain a payments licence from Swiss regulator Finma and instead switched its focus to the US.

Throughout this, Facebook has maintained its commitment to using the stablecoin for its Novi wallet, but Marcus now suggests that this could change.

"Let me be clear, if we only offered fiat money in Novi, it would bring people a lot of value," writes Marcus, adding: "So why not just do that and call it a day? Well, we might."

However, the former PayPal boss says that Facebook still backs the Diem project because "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".

Marcus says that Diem could have a profound effect on transforming the world's "broken" payments infrastructure, which contributes to 1.7 billion people being unbanked.

Novi has now secured licenses or approvals in nearly every US state, yet the Diem Association is still struggling for approvals despite addressing "every legitimate concern".

As for the hostility to Facebook's move into payments, Marcus claims this thinking is "profoundly un-American" and that the firm deserve a "fair shot" while also pointing out that it is already well embedded in the sector, enabling more than $100 billion in volume over the last four quarters.

He does acknowledge that Facebook's scale warrants extra scrutiny but says that people will have to make an affirmative choice to use Novi and that there will not be hundreds of millions of users from the off.

In terms of the business model, he says that Novi will offer free person-to-person payments domestically and internationally. This will eventually lead to a profit margin on merchant services.

Finally, the long-touted move into other financial services is trailed: "We can then branch out and offer a variety of other financial services in partnership with respected and well regulated partners, and expand from there."

Concluding, Marcus fires a shot across regulators bows: "Change is long overdue. It’ll happen one way or another. Novi is ready to come to market. It’s regulated, and we’re confident in our operational ability to exceed the high standards of compliance that will be demanded of us.

"We feel that it’s unreasonable to delay delivering the benefits of cheaper, interoperable, more accessible digital payments."

Comments: (3)

Christopher Williams
Christopher Williams - RTpay - Winchester Uk 18 August, 2021, 16:56Be the first to give this comment the thumbs up 0 likes

It is good to hear that David Marcus is perhaps ready to look at using fiat currencies, whether as the underlying format for Diem, or through international clearing.

I don't think there is any reluctance to use Facebook's network structure - as long as the local currences are the settlement basis. In fact, that can be ideal as its connectivity to its users can solve some 'last mile' issues, while protecting the governments' money supply requirements. 

And it can be done at a fraction of today's costs!   

A Finextra member
A Finextra member 19 August, 2021, 12:27Be the first to give this comment the thumbs up 0 likes

Wow would DIEM be good for unbanked people - i Guess that Diem FB want to have "Fiat currency" in exchange of updating value to the wallets of unbanked? Why not use "fiat" directly instead? Why would intra FB Diem transfers be cheaper than intra FB transfers of "fiat" for end users?  What are the benefits for end users for Diem? Seems as foggy as the "beenfits for CBDC" stated by central bankers? 

Kushagra Jhunjhunwala
Kushagra Jhunjhunwala - Cyte Systems Private Limited - Mumbai 23 August, 2021, 08:34Be the first to give this comment the thumbs up 0 likes

The Diem project has been under scruitny because US regulators fear that it will overtake the dollar as the global currency and reduce it's importance. The advantage that Diem provides is that it's more stable than the dollar since it's backed by a variety of assets from multiple countries.

As far as Novi (Facebook) is concerned, serving consumers and generating profit is of prime importance, hence they will go ahead with fiat currency for now while working on the Diem project. They will mostly incorporate Diem in their wallet once it has the required approvals.

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