Facebook Chooses Coinbase As “Custody Partner” For Digital Wallet Ahead Of Stablecoin Launch
October 19, 2021 |Facebook Chooses Coinbase As "Custody Partner" For Digital Wallet Ahead Of Stablecoin Launch
With crypto markets in the green and equities still riding high on their latest comeback rally, Coinbase has just dropped a bombshell update about Facebook's great attempt to seize control of the global monetary supply (or at least a slice of it) thanks to its nearly 3 billion monthly users who would have immediate access to whatever monetization options they are provided.
Facebook revealed Tuesday that it has chosen Coinbase as its "custody partner" for its Novi "pilot program," which will focus on creating new digital wallets for enabling users to send and receive money abroad instantly and securely, with no fees. Crypto markets have always struggled with this last bit, and Facebook CEO Mark Zuckerberg thinks it'd be a better idea if we just let Facebook handle all remittance payments from global migrant workers, a morass of capital slowly trudging its way from the developed world to the developing.
It's just a pilot program (for now, at least). But the fact that the company is making this announcement suggests that something even bigger is coming: Facebook is about to move ahead with the first stage in imposing Zuck's grandiose vision for a stablecoin fiat replacement - Diem - which could be one of the biggest steps since Zuck first announced it half a decade ago (and which as we explained previously, could become the de facto FedCoin in due time).
But Zuck isn't just unleashing his grand vision on the world in the hopes that we will use it: he is doing his best to impose it on the world, and the first step is to manufacture demand. So it has chosen the not just the perfect partner companies but the perfect partner country: Guatemala.
Here's what Coinbase says:
Facebook has chosen Coinbase as its custody partner for its pilot of Novi, a new digital wallet that enables people to send and receive money abroad instantly, securely, and with no fees.
For the pilot, Coinbase is supporting Novi via Coinbase Custody, which keeps user funds secure with our proprietary, fully segregated cold storage capability for managing private keys.
Novi users who can participate in the pilot can acquire Pax Dollar (USDP) through their Novi account, which Novi will hold on deposit with Coinbase Custody. Novi users will then be able to transfer USDP between each other instantaneously.
Novi users’ funds will be held within Coinbase Custody Trust Company, a qualified custodian and a New York limited purpose trust company. Coinbase Custody Trust Company is regulated by the New York Department of Financial Services and is a fiduciary under New York state banking law. Novi users also benefit from Coinbase Custody’s leading insurance program, which includes a $320 million commercial crime policy.
Coinbase Custody is a leading crypto-native platform and custodian that securely manages $180 billion (as of 6/30/21) 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.
It's pretty clear that Facebook is 100% committed to this project and David Marcus says the pilot program between the US and Guatemala -which Facebook is handling in partnership with Coinbase and Paxos - will be available, for no fee, very soon.
But what is perhaps most important in today's announcement, and what investors appear to have ignored, is that according to Facebook's David Marcus, the company hopes the pilot program will "show a use-case for a stablecoin". This, as a reminder, is the holy grail that Facebook has been going after all along, first with Libra and now, with Diem.
Remarkably, the news sparked a selloff in shares of Silvergate Bank, as some algos appear to be very confused assuming that Facebook has dumped Silvergate as its Diem launch partner. As a reminder, the tiny, $3 billion market cap Silvergate will be the exclusive issuer of Facebook's Diem once the world's largest social network launches it. And no, Facebook has not dumped it in favor of Coinbase, on the contrary: it is merely using Coinbase as a platform to set the stage for Diem, whose launch will send Silvergate shares soaring. As such today's bizarre dump is truly a perplexing move...
... and shows just how little understanding of the fast-moving development in the crypto sector marginal investors actually have.