Facebook’s Novi wallet launches pilot project with Paxos stablecoin not Diem – Ledger Insights

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Today, Facebook’s Novi announced a “small” pilot of its digital currency portfolio in Guatemala and most of the United States. The initial phase will use the Paxos stablecoin rather than Diem, which Facebook founded in 2019 but has yet to receive regulatory approval. Coinbase is on guard.

“We intend to migrate to Diem once it receives regulatory approval,” said Novi leader David Marcus.

In retreat, Diem faced one regulatory hurdle after another. And central banks are still very uneasy about its potential to become systemic. Besides financial stability risks, this could also give it the power to challenge sovereign currency.

By launching Novi without Diem, in some ways the cat is out of the bag. One prospect might be that now Novi has been launched, regulators might as well give Diem the green light.

Another point of view is that authorities might be more comfortable with Paxos, which has historically positioned itself as being highly regulated. It’s not just in the cryptocurrency world. It also has a platform for the settlement of mainstream stocks using blockchain.

Paxos is considered the most conservative stablecoin issuer, with its supporting assets entirely in cash deposits and cash equivalents. Besides the Paxos dollar used by Novi, Paxos is the stablecoin service provider for Binance USD stablecoin, the third largest stablecoin with a market cap of $ 13 billion. The market capitalization of the Paxos dollar is currently less than one billion. Paxos also provides cryptocurrency services to PayPal.

Identity and privacy policy

In order to use the Novi Wallet for payments, it requires government ID and it also uses facial recognition. However, it says it keeps the photos or video encrypted, but the “facial recognition pattern” is removed within 24 hours.

One of the big concerns expressed during the Senate and Congress hearings was the ability for Novi to share data with Facebook. Although there is a big question about how much most users really care. We have reviewed its privacy policy and here is the corresponding paragraph.

“We may use Facebook or other companies to help show you advertisements. When we use Facebook’s advertising services, it is similar to how other businesses partner with Facebook for their own advertising purposes. In these cases, Facebook uses the information we provide and the information it has about its users to provide its advertising services. However, we do not share your Novi financial information with Facebook for its own advertising purposes.

In addition to P2P payments and card withdrawals, a feature tested only in Guatemala is the ability to exchange the wallet amount for physical money. This is important for Facebook’s financial inclusion goals.

The reaction of cryptocurrency prices is notable. The prices are exceptionally stable.



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