Diem has penned a response to the group of Senators that called out Facebook, asking the social networking company to shelve its Novi and Diem offerings
On Tuesday, a group of senators wrote to Facebook CEO Mark Zuckerberg asking that his company abandons plans for its digital wallet, Novi. The wallet is intended to eventually custody the Diem token, though it is scheduled to launch with the PAX dollar token for its pilot program.
Diem has since responded to the letter, saying that the lawmakers had misread the relationship between itself and Facebook. Diem explained that it is not the same entity as Facebook, and it is instead an association with members from both Novi and Facebook. The project clarified that Novi’s scheduled pilot program had no relation to the Diem token as it would categorically use the Paxos stablecoin.
“Diem is not Facebook. We are an independent organisation, and Facebook’s Novi is just one of more than two dozen members of the Diem Association. Novi’s pilot with Paxos is unrelated to Diem,” a section of the statement read.
The response to the US senators also reviewed the senators’ protest that Diem had failed to show how it would prevent illegal financial transactions and crime on the platform. Diem Networks cited that it has been positively reviewed by the Treasury Department’s Financial Crimes Enforcement Network, reflecting Diem’s financial crime compliance framework. Diem also held the opinion that it has among the best controls in the industry; the prohibition of anonymous transactions to non-hosted wallets until their financial risks are managed.
“Beyond financial crime compliance, we engaged extensively with an interagency regulatory team about the design of the project. As part of that review, we made adjustments to reflect feedback we received, and we were informed by a senior regulator that Diem is the best-designed stablecoin project that the US government had seen,” Diem expounded on its position.
Diem additionally disclosed that when it eventually launches in the market, it would have considered the feedback from regulators worldwide. The project promised to offer a payment system that would be secure for users and protected from financial crime.
Since Facebook proposed it in 2017, the Diem stable coin has been facing constant scrutiny. This is not the first time US senators are questioning the project. The blockchain-based payment system was previously criticised in 2019 by Senators Brian Shatz and Sherrod Brown, who felt that Facebook engaged in financial activities without subscribing to the relevant regulatory requirements.
The senators had also complained that the project exposed consumers to high levels of risk. Once again, the danger posed by the project to users and the financial system is the primary concern expressed by the five Democratic senators. The quintet is asking Facebook to stick to its previous commitments not to launch a digital currency under improper regulatory circumstances. The senators maintain that the social networking company is not to be trusted in executing a payment system, let alone a digital currency.