Earlier this year Meta Platforms sold its stakes in the Diem Association, the cryptocurrency project it had been working on in recent years alongside other digital payment and technology companies. Crypto bank Silvergate Capital (SI -2,26%) was the buyer of Diem's assets, but it is not yet clear what will become of Meta's Novi digital wallet.
A year after the start of the pilot program, it appears that Novi is about to close its doors and will no longer be available after September 1, 2022. In practice, all of Meta's financial value comes from advertising (and a little from virtual reality ), therefore the closure of Novi will be irrelevant to the financial statements. But this is still a temporary setback for the company and its aspirations to build a real digital economy to complement its apps. Here's what shareholders need to know.
What exactly were Diem and Novi?
The Diem Association (formerly known as Libra) was a partnership for a cryptocurrency project. It was backed by Meta and other tech companies to develop a digital payments system using blockchain technology, the same digital ledger software used by cryptocurrencies like Bitcoin and Ethereum.
In January 2022, it was announced that some Diem Association assets were sold at a loss to Silvergate for $ 200 million. Silvergate intends to use the assets to accelerate the development of its stablecoin-based digital payments platform. Divided among the other technology partners, the $ 200 million in total proceeds - not to mention the small losses from the sale - are irrelevant to Meta and the tens of billions of dollars in revenue it collects each quarter.
However, at least one other Diem association partner, Shopify, has provided shareholders with some details about its losses from the sale. Shopify reported a loss of $ 1,66 million and received $ 8,3 million in Silvergate Capital stock at the time of the Diem Association sale in January.
But Diem wasn't the only Meta iron in the cryptocurrency flare. Last October, you began testing the use of Novi, a blockchain wallet that could be used for remittances, i.e. transfers of money to a recipient in another country. Novi's pilot program was available to users in the United States and Guatemala and used the Paxos stablecoin. The project was launched with the help of Coinbase Global. But the latter remnant of the Diem crypto project has been shut down, the Novi website announced on July 1.
Novi users have been advised that they must withdraw funds by September 1, 2022, as the digital wallet will no longer be available for use after that date.
Are Meta's digital dreams dead?
While it appears that Meta has stopped (at least for now) trying to build a new cryptocurrency or blockchain-based payments network, that doesn't mean that digital payments are out of the equation altogether. In its quarterly report for the first quarter of 2022, under the heading “business risks”, Meta indicated payment transactions and digital payment initiatives as factors that increase regulatory control over its operations.
In addition to Novi, Meta has payment and money transfer (albeit not cryptocurrency) features built into its apps. WhatsApp payments are still a pilot program in Brazil, India, and for some select users in the United States. Meta Pay is also used within Facebook and Instagram for online checkout and money transfers.
Returning to the world of cryptocurrencies and their overlap with the metaverse, Meta would also be working on a non-fungible token market (NFT). No doubt other projects are also underway that bring the digital economy into its apps and virtual reality products (the Quest 2 VR headset).
However, with 97% of advertising-related revenue in Q2022 2 (and the remainder attributed to "Reality Labs," which consists mainly of sales of Quest XNUMX and related VR), Meta still has a long way to go before it. payments of any kind become a significant part of your business. Novi is the latest shred of Diem about to close, but more projects are to be expected to emerge in the social media titan's attempt to realize the metaverse.