Facebook adds two new friends; ‘unfollows’​ an existing one

Novi : Robust Use-Case, Strong USPs

Novi Financial, a subsidiary of Facebook, today announced the roll out of its digital wallet app in the US-Gautemala remittance corridor. For the pilot, Novi announced two new partners: Coinbase (for custody solutions) and Paxos (for their USDP Stablecoin). Novi’s use case is robust: an estimated 1.7 billion people worldwide could have access to safe and affordable financial services through smartphones if the right digital financial architecture is created.

Novi also defines some clear USPs for its digital wallet:

Keeping track of the changing profile pictures

The Novi project’s journey from ideation to pilot has seen some identity reboots among the partners: Novi was earlier known as Calibra; USDP was earlier known as PAX and yes, the most popular of them all: Libra — Facebook’s original crypto play — is now known as Diem.

Funnily enough its DIEM that appears to be have been ‘unfollowed’ (isn’t that usually a precursor to an ‘unfriend’ request?) as Facebook’s Novi chose Paxos’ USDP instead as its stablecoin.

David Marcus, Head of Novi, did indicate — both in the press release as well as in series of tweets — that Diem remains an integral part of Novi’s plans. This is what he said:

Our support for Diem has not changed. We see great value in the way Diem is designed with robust protections for consumers and controls to combat financial crime. We intend to migrate Novi to the Diem payment network once it receives regulatory approval. The goal for Novi has been and always will be to be interoperable with other digital wallets and we believe a purpose-built blockchain for payments, like Diem, is critical to deliver solutions to the problems that people experience with the current payment system.

Why did Novi choose Paxos’ USDP over Facebook’s Diem?

Let’s flip the calendar back a bit. Libra (now Diem) was announced as a Cryptocurrency way back in 2019. Shouldn’t Libra (now Diem) then have been the first choice stabelecoin for Novi’s digital wallet?

This isn’t an easy one to explain. The technology and motives behind the Libra announcement were crystal clear. Facebook’s vision of a world in which everyone on the planet is included in the financial system was audacious. The devil may have been in the details though and in execution. Libra was nothing short of a new world order. Based in Geneva, with 28 founding members that included the likes of Visa, Mastercard, Paypal, Uber and Lyft among others, the Libra’s value was tied to a basket of currencies that included the USD, GBP, EURO, CHF and JPY.

In hindsight, this appears to have been a major design flaw and could have been the reason for the rapid ascent and adoption of other stablecoins like: Circle’s USDC, Tether’s USDT and Paxos’ USDP. All three stablecoins were created with the simpler design of a 1:1 peg with the USD.

Paxos’ USDP appears to have pipped the other two to Novi’s post — yeah, we are still punning social media 🙂 — on the basis of its significant regulatory attributes. Paxos’ 1:1 stablecoin peg — 96% in USD Cash and Cash Equivalents — is as close to 1:1 as it gets.

The Novi shift to Diem may eventually happen — in May 2021, Diem announced plans to launch a USD stablecoin which it plans to manage against USD reserves — but Paxos’ selection for the pilot is a ‘click-the-like-button’ moment for all cryptofirms that prioritize high standards of self-regulation and customer protection.