A mere seven months after selling off the assets of its digital currency Diem, Meta has announced that it will retire its digital wallet Novi on September 1, 2022. GlobalData notes that, beside Meta’s shift towards metaverse projects, one of the main reasons for this decision is that both Novi and Diem were plagued with regulatory roadblocks, and this severely impacted their development. However, the leading data and analytics company suggests that a digital wallet asset could be useful for Meta’s metaverse development, and the company could still use some of Novi’s resources for these projects.

In the crypto world, a digital wallet is used to store digital currencies like cryptocurrencies. In the metaverse, however, it could be used to store virtual assets such as NFTs, digital land and properties bought on the metaverse and prove a user’s identity.

Chris Dinga, Payments Analyst at GlobalData, comments: “A blockchain-based digital wallet like Novi would allow instant payment transactions to take place in the metaverse, making those transactions frictionless. As user identity will be linked to each digital wallet, each asset stored on these wallets will directly link the identity of the user. This should add a layer of ownership to digital assets. In the eventual case of theft happening in the metaverse, it would be possible to prove the identity of the rightful owner through the blockchain as ownership will be recorded on it.”

Novi was intended to become a global instant payments platform that would enable domestic and international transfers by using Meta’s own stablecoin Diem. However, due to regulatory opposition, Diem was never approved by regulators due to fears that it would become a systemic risk to the economy by destabilising monetary policy and facilitating money laundering. If Diem was adopted, it would have been made available to the 3.6 billion active monthly users through Facebook’s family of apps, according to Meta’s 2022 annual report. While Meta was only able to release Novi for a limited pilot test in October 2021, Diem was never released.

Dinga continues: “The metaverse is Meta’s next big thing, but to drive its adoption, it will need to become more immersive and seamless. If the metaverse becomes popular and a large number of users take part in it, then we are likely to see a metaverse economy. There will be a need for a payment tool to facilitate transactions in the metaverse and keep track of them. By launching a digital wallet for the metaverse, Meta can become the first payment provider ahead of the competition.”

Hear Chris talk about this topic in GlobalData’s Instant Insights podcast, which is available on Youtube or Spotify.