Meta’s crypto project ends. Here’s what investors need to know

Earlier this year, Metaplatforms (META 0.94%) sold off its holdings in the Diem Association – the cryptocurrency project it had worked on in recent years with other technology and digital payment companies. Kryptobank Silvergate capital (SAY 1.03%) was the buyer of the Diem assets, but it was still unclear what would become of Metas Novi’s digital wallet.

One year after starting a pilot program, it appears that Novi is now closing the store and will no longer be available for use after September 1, 2022. Basically, all of Meta’s financial value is taken from advertising (and a bit from virtual reality)) , so Novi’s closure will be insignificant for the bottom line. But it is still a temporary setback for the company and its ambitions to build a full-fledged digital economy to follow the apps. Here’s what shareholders need to know.

What exactly were Diem and Novi left?

The Diem Association (formerly known as Libra) was a cryptocurrency project partnership. It was supported by Meta and some other technology companies when it developed a digital payment system using blockchain technology – the same digital ledger software used by cryptocurrencies that Bitcoin and Ethereum.

In January 2022, it was announced that certain assets of the Diem Association were sold at a loss to Silvergate for $ 200 million. Silvergate plans to use the assets to accelerate the development of its own stablecoin-based digital payment platform. Divided between the other technology partners, $ 200 million in total revenue – let alone small losses from sales – is an insignificant sum for Meta and the tens of billions of dollars in revenue it draws in every quarter.

However, at least one other Diem Association partner, Shopify (SHOP -2.82%), highlighted the shareholders with some details about the losses from the sale. Shopify recorded a loss of $ 1.66 million and received $ 8.3 million in Silvergate Capital shares at the time of Diem Association’s sale in January.

But Diem was not Meta’s only iron in the cryptocurrency fire. In October last year, it began testing the use of Novi, a blockchain wallet that can be used for money transfers – money transfers made to a recipient in another country. The Novi pilot program was available to users in the United States and Guatemala, and used Paxos‘stablecoin. The project had been started with the help of Coinbase Global. But this last remnant of the Diem crypto project is now closed, according to an announcement on Novi’s website on July 1.

Novi users have been informed that they must withdraw money by September 1, 2022, as the digital wallet will no longer be available for use after that date.

Are Meta’s dreams of digital values ​​dead?

Although it seems that Meta has finished (at least for the time being) trying to build a new cryptocurrency or blockchain-based payment network, this does not mean that digital payments are completely out of the equation. In its quarterly report for Q1 2022 under the list of “business risks”, Meta cited payment transactions and digital payment initiatives as factors that increase regulatory scrutiny of the business.

In addition to Novi, Meta has payment and money transfer options (albeit not crypto-driven) built into its apps. WhatsApp payments is still a pilot program in Brazil, India, and for select users in the US, Meta Pay is also used on Facebook and Instagram for online cash and money transfers.

Back in the crypto world and its overlap with the meta-verse, Meta is also apparently working on a non-fungible token (NFT) marketplace. Other projects that bring a digital economy to the apps and virtual reality products (Quest 2 VR headset) are also undoubtedly underway.

But with 97% of revenue related to advertising in the first quarter of 2022 (with the rest attributed to “Reality Labs”, which is mainly Quest 2 and related VR sales), Meta has a long way to go before payments of any kind are meaningful part of the business. Novi is the last bit of Diem closing, but you should expect other projects to pop up in social media titans’ quest to make the meta-verse happen.