Facebook has joined forces with Coinbase on a new effort to create a digital wallet that allows people to send money internationally without any fees.
According to a letter from Facebook, Facebook's Novi, which has been in the works for years, will be running pilot programs in the US and Guatemala. Novi is available to anyone in the US except those living in Alaska, Nevada, New York and the US Virgin Islands.
The tool lets people send USDP -- a stablecoin pegged to the price of the US dollar -- which can then be withdrawn in a local currency. USDP is one of a number of cryptocurrencies pegged to the US dollar.
In a blog post, Coinbase explained that it is providing Novi with its proprietary, fully segregated cold storage capability for managing private keys called Coinbase Custody.
"Coinbase Custody is a leading crypto-native platform and custodian that securely manages $180 billion of crypto assets on its platform. Over the past nine years, Coinbase has developed deep expertise in secure and scalable crypto infrastructure, which we initially built to power our own first-party applications," Coinbase said.
"We then productized this infrastructure and now supply our secure infrastructure solutions to the rest of the market."
David Marcus, the head of Novi, said the digital wallet was meant to help the 1.7 billion people around the world who do not have bank accounts but have access to smartphones.
"We chose USDP so that we can test our systems with a stablecoin that has been operating successfully for over three years and that has important regulator and consumer protection attributes," Marcus said. "USDP reserves are fully backed by the US dollar and are held 100% in cash and cash equivalents. This means that people can easily withdraw their money in their local currency when they choose."
The app is available on the Google and Apple app stores. People can sign up for Novi using a government ID. The options for money withdrawal features vary by country.
Marcus noted that the Novi project was initially tied to Facebook's controversial Diem project, which was originally named Libra. It changed its name in a bid to demonstrate "organizational independence" after facing regulatory backlash globally.
Since its inception, the Facebook-backed cryptocurrency project has faced worldwide scrutiny. Over the past two years, the US House Committee on Financial Services has repeatedly expressed mistrust of Facebook's cryptocurrency plan, saying the company's attempt at entering into financial services was concerning and should be broken up.
Meanwhile, regulators from Albania, Australia, Canada, the EU and the UK have jointly expressed concerns about the privacy risks posed by Diem's digital currency and infrastructure.
This backlash led launch partners like Mastercard, Visa, eBay and Stripe to drop out of the project due to the worldwide regulatory scrutiny.
Novi, which was initially named Calibra, was built to hold Diem.
Marcus said Novi's support for Diem "has not changed" and that they "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 delivering solutions to the problems. that people experience with the current payment system," Marcus said.