Coinbase Global (COIN) shares jumped higher Tuesday after it said Facebook (FB) – Get Facebook, Inc. Class A Report will store funds from its new digital wallet with the cryptocurrency exchange group.
Coinbase said that Facebook has chosen it as the custody partner for Novi, a new digital wallet that the social media giant says will allow users to convert local currencies into crypto via a stand-alone app that plugs into other Facebook products such as Instagram.
Facebook will roll out a small pilot project, using the stablecoin Pax Dollar, in both the U.S. and Guatemala, allowing users to buy Pax through their Novi accounts. Coinbase will store the funds within its custody trust company, which manages around $180 billion of crypto assets and is regulated by the New York Department of Financial Services.
“We have an opportunity to help change the game for so many people who have been left behind by the current financial system,” said David Marcus, who leads Facebook’s ‘F2’ financial division. “I believe we should take that opportunity and I’m eager for us to start the journey.”
Coinbase Global shares were marked 3.6% higher in early Tuesday trading to change hands at $303.78 each, a move that would still leave the stock some 30% south of its post-IPO peak of $429.50 earlier this year.
Facebook shares, meanwhile, rose 1.32% to $339.70 each.
Last month, Coinbase said it received a Wells Notice from the U.S. Securities & Exchange Commission — essentially a formal intention from the securities regulator to sue — linked to the company’s plans to allow users on its platform to earn interest by lending their cryptocurrency assets.
That followed better-than-expected second quarter earnings and a surge in dealing volumes, while net revenues rose 1,100% from last year to $2 billion.
Retail monthly transacting users, a key metric in tracking sustainable platform growth, was up 44% from the first quarter, Coinbase said, and more than 9,000 institutional clients are now using its crypto platform.
Earlier this spring, Facebook moved its Diem project — originally known as Libra — from Switzerland to the United States and unveiled a partnership with Silvergate Capital Corp. to launch a new stablecoin before the end of the year.