Facebookâ€™s mission is to â€œbring the world closer together.â€ Increasingly, thatâ€™s about not just connecting friends and family to share messages, but also serving as a platform for peopleâ€™s financial lives.
Some $100 billion in payments have been enabled by Facebook over the past year, said David Marcus, who runs the companyâ€™s financial services unit. But thatâ€™s just the start of the social networkâ€™s ambitions in the finance industry, Mr. Marcus writes in a new memo about the countryâ€™s â€œbrokenâ€ payments system, reported in the DealBook newsletter.
At the center of Facebookâ€™s push into payments is Novi, a digital wallet intended for users to move money around the world quickly and cheaply (free, in many cases). The company had a plan to pair it with a â€œstablecoinâ€ cryptocurrency called Libra, but that was shelved amid regulatory scrutiny, and now the scaled-back project, known as Diem, is overseen by an outside nonprofit group seeking the necessary government approvals.
In recounting some of Facebookâ€™s setbacks in trying to break into the crypto payments industry, Mr. Marcus describes the tech giant, the subject of antitrust inquiries around the world, as an underdog.
Facebook faces unfair resistance in the financial industry, he wrote. â€œIâ€™ve heard multiple conversations about how this proposal would be so great if only Facebook wasnâ€™t involved,â€ he said. â€œI understand and accept the need for extra scrutiny due to our scale.â€
But Mr. Marcus describes Facebook as a â€œchallenger in the payments industry,â€ with no specific plan yet to monetize use of the Novi wallet, which wonâ€™t charge for person-to-person payments, even across borders.
He added that allowing users to pay with dollars, euros and other fiat currencies via the Novi wallet would bring a lot of value.
â€œSo why not just do that and call it a day?â€ he wrote. â€œWell, we might.â€ But before deciding on that, he doesnâ€™t want to â€œwaste our shotâ€ at incorporating stablecoins into an â€œopen, interoperable protocolâ€ for online payments. â€œTo have the maximum impact, building a closed system using fiat only wasnâ€™t going to cut it,â€ he said in the memo.
Crypto advocates say that blockchain technology allows for products that eliminate middlemen, credit checks and fees, and that it allows people excluded from traditional financial services to transact anytime, anywhere. Mr. Marcus believes that a well-designed stablecoin pegged to a fiat currency, backed one to one in cash reserves, could offer strong consumer protections. It would also provide quicker access to funds than traditional bank accounts.
In practice, regulators are wary of stablecoins. An investigation of the popular stablecoin Tether by the New York attorney generalâ€™s office found that the company minted tokens without reserves to back them. In recent weeks, crypto tokens have raised concerns from the Treasury secretary, Janet L. Yellen; the Securities and Exchange Commission chair, Gary Gensler; and Senator Elizabeth Warren, Democrat of Massachusetts.
Mr. Marcus is seeking to allay those concerns. â€œWe will continue to persevere and demonstrate we can be a trusted player in this industry,â€ he wrote, adding that the Novi wallet has licenses or approvals in nearly every U.S. state and that the Diem stablecoin project â€œhas addressed every legitimate concern.â€
Facebookâ€™s digital wallet is ready to come to market, Mr. Marcus said, and â€œwe deserve a fair shot.â€ To judge by Facebookâ€™s difficulties getting to this point, regulators remain to be convinced.