Crypto meltdown draws scrutiny from regulators, Meta discontinues Novi digital wallet

Yahoo Finance crypto reporter David Hollerith breaks down the outlook on crypto after European regulators take cryptocurrency meltdowns into consideration, as well as Meta's timeline to discontinue its Novi digital wallet feature by September 1.

Video transcript

RACHELLE AKUFFO: More scrutiny and regulation ahead for cryptocurrencies. [INAUDIBLE] crypto crashes have wiped out more than $2 trillion, and that's drawn the ire of the Bank of England. Our David Hollerith has been following all this latest crypto news. So, Dave, just how much tougher, then, could these rules get?

DAVID HOLLERITH: It's a good question, Rachelle.. I think that the main thing that's being underlined right now is the focus on stablecoins. Central bank-- the UK central bank today conveyed through meeting minutes they released that they want heavier regulations on stablecoins. That's also being conveyed by the European Systemic Risk Board, as well as different parts of the US government, most led by the Biden administration.

But I think the main idea here in terms of regulation is just to get it done at this point. The central bank note or meeting notes did not really indicate a specific type of policy framework they wanted to move to. But regarding stablecoins, the main thing that's being talked about is whether or not stablecoin issuers should be regulated like banks.

There's also more I guess what we can say is more crypto-friendly regulations that are being posed as bills in the US right now, which are just sort of stipulating that cryptocurrency-- or stablecoin issuers need to have at least 100% of their reserves backed in safer assets such as cash or US treasuries. And the whole point of this is so that stablecoins can meet redemptions to prevent bank runs.

DAVE BRIGGS: Also, David, Meta Platforms announcing today it's discontinuing its cryptocurrency Novi. Can you tell us what it means for Meta, and is it just a greater reflection of the market as a whole?

DAVID HOLLERITH: Yeah, so this actually gets a little confusing, because, obviously, Meta has gone through a lot of rebranding in the past, particularly with this project. So back in 2019, Libra was a stablecoin that Facebook at that time, as Meta was called, had sort of proposed as a project in which they wanted to basically improve cross-border payments globally. And this has changed a lot based, essentially on regulator backlash and sort of having difficulty for Facebook, now Meta, getting the project off the ground.

Now, part of this was Novi, which was sort of the cryptocurrency wallet that is connected to Libra, which was quickly rebranded as Diem-- so Facebook is-- or Meta, sorry, has actually sold its assets that hold the assets for Diem to the crypto bank Silvergate. But in light of this, they're also announcing, as of July 21, that they're shutting down the crypto wallet that is associated with Novi.

So this is sort of an end to Meta's first forays into crypto. But that being said, a Meta spokesperson has sort of underlined that the technology that has been used for this project will show up, potentially, in other products. Notably, Instagram and Facebook both have-- both allowing certain select creators to test and use NFTs. So I don't think we could say this is the end of Meta's foray into crypto assets, but it looks like it is sort of the end to their stablecoin, at least for now.

DAVE BRIGGS: OK, David Hollerith, appreciate the time. Thank you, sir.