The Novi pilot’s end appears to represent a final step back for Meta from the Libra project once meant to create a cryptocurrency backed by a basket of currencies. That effort, announced in 2019, drew near-immediate pushback from lawmakers concerned over the risk of money laundering and terrorism financing through one of the world’s largest companies.

The drumbeat of warnings from senators may have had a hand in persuading some of Libra’s early backers, such as Visa, Mastercard and Stripe, to withdraw their support. The project encountered difficulty finding a regulator that would work with it — even as it scaled back its ambitions and rebranded itself.

The newly minted Diem Association withdrew its application for a payments system license with Swiss regulator Finma, opting instead to move its primary operations to the U.S. and try to register as a money services business with the Financial Crimes Enforcement Network (FinCEN).

Even as the Novi pilot launched last October — as a money-transfer experiment between users in the U.S. and Guatemala and without the Diem stablecoin that was supposed to be its centerpiece — U.S. senators urged the company to “immediately discontinue” the pilot and “commit that you not bring Diem to market.” The Novi pilot used the Paxos Dollar stablecoin and leaned on Coinbase to provide custody services. 

“Time and again, Facebook has made conscious business decisions to continue with actions that have harmed its users and the broader society,” five Senate Democrats wrote in October.

Weeks after the pilot launched, Diem’s co-creator, David Marcus, said he would leave Meta. Marcus has since founded Lightspark, a startup that is developing a payments technology that runs on top of the Bitcoin blockchain, according to Protocol.

Silvergate Bank agreed in January to buy the Diem Association’s assets and intellectual property for $182 million and said at the time it aimed to launch a stablecoin this year using those assets through the bank’s existing technology.

Novi was meant to serve as an umbrella for all of Meta's financial products, including Facebook Pay. But the social network company this year began inching away from the Novi name in favor of the parent brand. Meta's financial operations became Meta Financial Technologies in March, and Facebook Pay became Meta Pay in June.

The pilot’s end comes as several crypto platforms have suffered a precipitous loss in value, and as officials in the Treasury Department and regulators alike continue to debate how to oversee the stablecoin space.

By Dan Ennis on July 5, 2022
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