On Tuesday, Facebook launched their crypto wallet, Novi. At launch, Novi supports Paxos Dollar (USDP), a stablecoin that hasn’t had the market adoption of their bigger competitors Tether (USDT), Circle (USDC), and Binance USD (BUSD). Facebook explains that they chose Paxos due to the age of the project, the “important regulatory and consumer protection attributes,” and that its “reserves are fully backed by the US dollar and are held 100% in cash and cash equivalents.” The company eventually plans to migrate to their own stablecoin, Diem, once it has cleared regulatory scrutiny. Novi is pitched as “a new way to send and receive money instantly, securely, and with no fees.”
This week, Coinbase published a blog post announcing they will be the custody partner for Novi’s pilot. Coinbase has a custody service, Coinbase Custody, that “keeps user funds secure with our proprietary, fully segregated cold storage capability for managing private keys.” Coinbase is one of the few major players in crypto custody right now, as of 06/30/21 they manage $180B in crypto assets.
A few hours after announcing the pilot, lawmakers Brian Schatz, Sherrod Brown, Richard Blumenthal, Elizabeth Warren and Tina Smith signed a letter to Facebook CEO Mark Zuckerberg urging the company to cancel the pilot. The letter said “Facebook cannot be trusted to manage a payment system or digital currency when its existing ability to manage risks and keep consumers safe has proven wholly insufficient.”