Facebook has big plans for expanding in the world of financial services. Its upcoming digital wallet, Novi, will be built upon the still-pending stablecoin Diem to supplant established players like PayPal in the process.
The social network’s Novi division will be “a next-generation digital wallet” built upon cryptocurrency that will be nothing short of a new “protocol for money on the internet,” according to David Marcus, head of Facebook Financial, who’s taking the lead in launching Novi in the coming months.
The cryptocurrency project Diem now operates as an independent association but retains close ties to Facebook. Facebook executive David Marcus straddles both worlds, sitting on Diem’s board of directors and heading up Facebook Financial — which plans to launch Novi in the coming months.
Speaking to Yahoo Finance, Marcus explained why Facebook still believes Diem is the right platform to build Facebook’s new digital wallet around.
“We believe that in terms of consumer protections, both on the purpose-built payments blockchain that Diem is and on the stablecoin itself, it’s in a class of its own,” he said.
Regarding Novi wallet, Marcus said it would have been easier to build the wallet to run on “existing rails.”
“As a matter of fact, a lot of people internally/externally have been puzzled by why we didn’t do it that way,” a Facebook executive added. But using existing rails, he said, “would actually not solve the systemic issues that we believe exist currently in our current payments infrastructure.”
According to Marcus, to keep Diem coins secure they will be backed by a combination of cash or cash equivalents and short-term government securities. He noted that is “much better than a current deposit with a traditional wallet here in the U.S.”
Marcus also mentioned initial concerns over whether Facebook’s coin had enough provisions to stop crypto criminals.
“I actually think and strongly believe that new infrastructure that enables more real-time reporting to all of the right authorities at the right time,” he said.
Comparing to other blockchains that have improved their traceability, Marcus added, “I think in our case, we’ve taken it like really, really to a whole new level.”
As reported before, Diem is struggling now to win over US policymakers for a new global payments system. The payment project has been facing difficulties with senior legislators in the Biden administration. Despite the whole might of the lobbying power of the social media giant, the project of Facebook stablecoin hasn’t been able to hit the ground running.