A look into Facebook’s new crypto wallet: Novi

In April 2021, one of the biggest social media platforms Facebook announced that it would be launching its digital crypto wallet called ‘Novi’ later this year.

After originally introducing ‘Libra’ in 2019, Facebook said it wanted to create a separate, private currency system to allow users to make cross-border payments more easily and empower people and businesses worldwide with a trusted and innovative financial network.

What’s a digital crypto wallet?

Before we jump into discussing Novi, it’s a good idea to first understand what a digital crypto wallet is, especially for those new to the crypto universe.

A digital crypto wallet stores a users’ private keys, keeping their crypto safe and accessible. They also allow users to send, receive and spend cryptoassets such as Bitcoin or Ethereum.

Private keys are the passwords that give a user access to their cryptoassets and prove their ownership. If a user misplaces their private keys, they can essentially lose access to their money.

Originally, crypto wallets were only available as hardware wallets like a Ledger or a paper wallet where keys were written on a physical medium like paper and stored in a safe place, but now most crypto exchanges have their own form of digital wallet.

What do we know about Novi so far?

Before announcing its plan to launch Novi, Facebook has been flirting with the idea of cryptoassets for many years. First, it was the launch of Libra and then rumours of Facebook adding bitcoin to its balance sheet. The launch of Novi is significant for the crypto industry as we see another influential business getting started with crypto.

Representing one half of Facebook’s overall crypto strategy, the Novi wallet will allow users to convert fiat currency into ‘Diem’ (formerly known as Libra), Facebook’s digital currency and stablecoin tied to the US dollar, which can be sent worldwide on Diem’s blockchain.

The idea behind Novi and Diem is to send money, fast. The currency and wallet are set to lower costs, with instant access to capital. Despite all the hype, Novi wallet isn’t quite ready yet, with no official launch date announced. However, it’s anticipated that Novi will integrate with apps that most users use in their everyday lives, such as WhatsApp, making it easy to access.

While it’s expected that Novi will attract more interest to the crypto industry with Facebook’s astronomical user base, this isn’t the company’s first venture into the payments industry.

‘Facebook Pay’, which is just shy of two years old, launched as a seamless and secure way to make payments for digital or physical goods, donate to charity or send money to friends across Facebook and its subsidiaries including Instagram, Messenger and WhatsApp.

The core payments platform for Facebook, recently rolled out a Shopify integration, which is expected to significantly grow the payments platform’s footprint and position in the saturated market.

How will it impact investors?

While Facebook is almost ready to stake its claim in the crypto space, investors are still hesitant around whether it will actually happen and the company has yet to offer investors and consumers anything tangible.

Facebook Financial head David Marcus confirmed in a blog post in early August 2021 that Novi is ready to come to market, yet some investors are beginning to question the social media giant, considering the original failed launch of Libra.

In fact, Libra hit several roadblocks early on, with issues around money laundering and regulatory concerns, which has delayed the launch and contributed to the name change.

While Novi could still launch and rely wholly on fiat currencies in the interim, the risks undercut the appeal of the entire project, especially because the benefits for consumers and businesses looking at the Novi wallet hinge on the capabilities of Diem.

Investors are also wary of Diem only being backed by the US dollar exclusively when it was originally said to be backed by a portfolio of fiat currencies.

However, Facebook has confirmed that it’s working closely with regulators in the US to ensure that the launch meets all regulatory parameters after years of antitrust issues, which could play favourably for the company.

So will Novi be a hit once it’s actually available in the market? It’s not exactly groundbreaking, but the audience it’s launching to does provide an exciting prospect and may even tie into the narrative of a generational shift from fiat currencies to digital currencies.

Cover image source: Pickadook (Shutterstock.com)