Facebook partners with Coinbase on digital wallet

Facebook has partnered with Coinbase to help with logistics for Novi, its new digital wallet for cryptocurrencies.

The wallet, which is currently being piloted in the US and Guatemala, allows users to send ‘SDP’, a stablecoin tied to the US dollar created by tech firm Paxos.

Facebook had originally intended to use its own stablecoin “Diem” for the project but has not yet been able to achieve regulatory approval.

Stablecoins are cryptocurrencies where the price is designed to be anchored to fiat money – for example, the US dollar - or to exchange-traded commodities such as gold.

David Marcus, head of Facebook’s Novi wallet project, said the social media giant still intends to migrate the Novi wallet to the Diem payment network once it receives the needed regulatory approval.

The crypto exchange’s stock rose 2 per cent on the news of the partnership.

The Diem project, Facebook’s cryptocurrency project which has been in the works since 2019, is still facing strong political opposition from certain quarters.

A group of Democratic senators including Brian Schatz, Sherrod Brown, Richard Blumenthal, and Elizabeth Warren said “these plans are incompatible with the actual financial regulatory landscape — not only for Diem specifically, but also for stablecoins in general” in a letter to Facebook chief executive Mark Zuckerbeg.

Paxos also provides crypto services to PayPal, and functions as a backer for Binance’s USD stablecoin.

Despite their growing importance stablecoins are drawing the attention of regulators worldwide. Earlier this month, the Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO) published preliminary guidance for public consultation which suggests stablecoins should observe international standards for payment, clearing, and settlement systems.

The news comes as cryptocurrency transactions are seeing more mainstream usage in the UK; the volume of UK daily cryptocurrency transactions has risen by 30 per cent to £468 million in the second quarter of the year, according to figures from Coinbase.

"We’re a challenger in payments,” said David Marcus. “We’ll offer free person-to-person payments using Novi.”

He added: “Once we have a solid customer base, we’ll offer cheaper merchant payments and make a profit on merchant services.”

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