Facebook (now Meta) wanted to launch a cryptocurrency payment service of its own a few years ago. The idea was that people would use it together with a Facebook-made digital wallet to send and receive money via chat apps like Messenger or WhatsApp. Called Libra, the project saw plenty of resistance from users and regulators, and Facebook seemingly abandoned it.
But the company didn’t give up altogether. The metaverse teasers from Mark Zuckerberg included cryptocurrency references just a few weeks ago. Fast-forward to mid-December, and WhatsApp has now launched a pilot program to support instant crypto payments in the US.
Facebook’s cryptocurrency dreams
Formerly known as Libra, Facebook’s cryptocurrency is now called Diem. It’s a stablecoin digital token, which means it would be pegged to a specific value, and that would reduce volatility significantly. Thus, the cryptocurrency would be suitable for payments like the ones WhatsApp will support. However, Facebook isn’t using Diem for its WhatsApp payments — more on that later.
Facebook also created a digital wallet, which investors use to store their coins securely on a device. The wallet will also make it possible to make cryptocurrency payments between people. The initial Libra wallet had a similar name — Calibra. Facebook changed it to Novi, which is what you’ll need to send and receive cryptocurrency payments via WhatsApp.
Before supporting crypto payments in the US, Facebook tested similar WhatsApp features in international markets. Users in India and Brazil can send and receive money via the chat app. But the process involves local fiat currency rather than crypto.
How WhatsApp cryptocurrency payments work
The WhatsApp cryptocurrency payments program is available to a limited number of people in the US. Novi’s Stephane Kasriel and WhatsApp’s Will Cathcart announced the news on Twitter.
There's a new way to try the @Novi digital wallet. Starting today, a limited number of people in the US will be able to send and receive money using Novi on @WhatsApp, making sending money to family and friends as easy as sending a message. 💸💬 pic.twitter.com/dGz3lejri7
— Stephane Kasriel (@skasriel) December 8, 2021
The only crypto that WhatsApp support is a stablecoin called Pax Dollars or USDP. That means $1 USDP will always cost $1 in fiat currency, so you’re not going to have to deal with the high volatility associated with most cryptocurrencies. Furthermore, USDP does not belong to Facebook. It’s a company called Paxos that issues the USDP. Finally, Coinbase is a custody partner for Facebook.
In other words, you’d have more reasons to trust the WhatsApp cryptocurrency payments system than Facebook’s previous Libra initiative.
As for the actual process of sending and receiving money via WhatsApp, the process should be quite simple. Everything happens inside the chat app, with payments working just like an attachment transfer. Also, it all happens instantly, so there should be no wait times between sending and receiving funds.
New in the US: use your @Novi digital wallet to send and receive money right within a @WhatsApp chat. People use WA to coordinate sending money to loved ones, and now Novi will help them do that securely, instantly and with no fees. https://t.co/4wG4t8zwKh
— Will Cathcart (@wcathcart) December 8, 2021
What about encryption?
The best part concerns commissions — but that’s maybe the worst part as well. You don’t have to pay any transfer fees when you send or receive money. And you don’t have to pay a fee when you move money to your bank account. Also, the Novi cryptocurrency transfers in WhatsApp have no limits in place. You can do it as much as you need to do it.
But whenever Facebook launches a new free product, you have to ask yourself what the company might be after. You pay for the free Facebook, Instagram, and WhatsApp features with your data. It’s unclear at this time how and if Facebook plans to track financial transactions happening in its apps via its Novi wallet.
WhatsApp encryption will remain in place during these cryptocurrency payments. Facebook and other third parties can not spy on chats and calls. But the Novi wallet processes WhatsApp cryptocurrency transactions. These payments can be tracked via the USDP blockchain.
Also, to use Novi, you’ll have to provide identification and link up a bank account. That’s how most digital wallets operate to ensure that the companies processing crypto payments know the user’s identity.
That said, it’s unclear how long you’ll have to wait for the WhatsApp cryptocurrency payments to become widely available. If you can’t wait to try the feature, you can always sign up for the Novi wallet, assuming it’s available in your region.