Facebook is testing a scaled down version of its Novi cryptocurrency wallet. Novi is available to a restricted number of people in the United States and Guatemala.
Diem Association is a founder member of Facebook. Instead of using the association’s stablecoin (Diem) on the Diem network’s blockchain, the organisation is teaming with Paxos and Coinbase to allow customers to send and receive USDP, with Coinbase handling crypto custody. However, this is only a first phase; Facebook intends to replace USDP with Diem at some point.
What is the Diem Association?
The Diem Association is a membership-based organisation dedicated to the development of a blockchain-based payment system that promotes financial innovation, inclusivity, and transparency.
Facebook had big aspirations for its cryptocurrency initiative at first. The Libra Association is a group of firms formed by the company. They were meant to debut the Libra cryptocurrency, a completely new digital currency backed by a basket of fiat currencies and securities, together. Originally, it was planned to be based on a combination of real-world currencies rather than a single one.
However, several central banks were against Facebook’s action, believing that Libra will become a quasi-sovereign currency in some countries. The organisation said last year that it would concentrate on single-currency stablecoins, limiting its ambitions.
A few months later, the Libra Association announced certain changes. Diem Association was the project’s new name. Calibra, Facebook’s wallet project, was renamed Novi as well.
And now Facebook is putting Novi to the test with real people. The business focuses on remittances between the United States and Guatemala. Novi users who want to send money can do so by downloading the Novi app, creating an account, and adding money using a debit card as a payment option.
When you add USD, it is automatically converted to USDP with no expenses. Paxos launched USDP, a stablecoin connected to the US dollar. It was previously known as the Pax Dollar (PAX), however Paxos recently changed its name to USDP.
USDP is backed by cash and cash equivalents behind the scenes to assure its worth. Coinbase Custody manages user funds, which means that Coinbase keeps USDP funds for Novi users.
Following that, Novi users can transmit USDP to other Novi users. There are no costs associated with money transfers once again. However, you are unlikely to be able to use Novi to make in-store purchases or pay your rent. Users can withdraw their Novi sum at a cash station or transfer it to a bank account because of this.
However, Novi does not specify whether there are any fees associated with converting your USDP to Guatemalan quetzal. So we’re back to square one, with Novi having to choose an exchange rate that takes into account spread, liquidity, and other factors. Novi will also need to build fiat-to-crypto on-ramps and off-ramps in any market where it wishes to operate.
Novi, according to Facebook, is just getting started. To begin with, it is only available as a pilot for a select group of users in Guatemala and the United States (except Alaska, Nevada, New York and the U.S. Virgin Islands). Second, Facebook and the Diem Association have not ruled out the possibility of launching their own cryptocurrency in the future.
“I do want to be clear that our support for Diem hasn’t changed and we intend to launch Novi with Diem once it receives regulatory approval and goes live. We care about interoperability and we want to do it right,” David Marcus said on Twitter.
In June of this year, Facebook announced the Libra cryptocurrency. Since then, the crypto industry has altered dramatically. Some stablecoins, in particular, have grown in popularity to the point where Tether and USD Coin currently have a combined circulating supply of more than $100 billion. So it’ll be interesting to see if Diem can catch up to existing stablecoins and open up new applications.