Social media giant, Facebook is said to be building a cryptocurrency targeting global payment space. The digital currency, will focus on small payments in India says a Bloomberg report.
Facebook’s ambition to place a stake on global payment system has been an open secret since 2014 when the company hired David Marcus a former president of payment firm PayPal. Interestingly, Marcus – then the Vice President of Messaging Products and head of Facebook Messenger unit at Facebook – was appointed a director on the board of Coinbase, the world’s most popular cryptocurrency wallet in 2017.
It will be recalled that in January, Mark Zuckerberg, CEO of Facebook had disclosed that the company would “go deeper and study the positive and negative aspects of” cryptocurrencies. In May, Marcus was drafted to spearhead a Facebook secretive blockchain initiative.
“After nearly four unbelievable rewarding years leading Messenger, I have decided it was time for me to take on a new challenge,” Marcus wrote in a Facebook post at the time, “I’m setting up a small group to explore how to best leverage blockchain across Facebook, starting from scratch.”
Marcus’ new unit also received a massive talent boost with the hiring of about 40 people to work on the blockchain initiative. In August, Marcus announced his exit from the board of Coinbase in order to avoid a perceived conflict of interest.
Facebook, the Bloomberg’s report says, is looking to develop what is known as a stablecoin.
What is a stablecoin?
A stablecoin refers to cryptocurrencies designed to minimize the effects of price volatility. In other words they seek to function as a store of value and a unit of account. Stablecoins offer a way to deposit money ahead of buying into bitcoin, Ethereum or other tokens more quickly than a bank account. They also allow profits to be moved from tokens and, among other things, are a more stable way of sending crypto to another person (or business) without being subject to moving prices.
Bloomberg also noted that as many as 120 stablecoin projects has already been undertaken in 2018, with many of them shutting down or facing controversy.
Facebook’s stablecoin
It is not bitcoin. It is unlike anything bitcoin hopes to be in terms of autonomy and stability. The Facebook stablecoin will have a value based on the United States currency ($) to minimize the volatility seen by more high-tech alternatives like bitcoin.
Secondly, WhatsApp will provide the test board for its launch. WhatsApp reaches more than 1.5 billion people. Facebook will be banking on the more than 200 million users it has in India to get it off on a good start. Remittance is a big industry in India with tens of billions of dollars sent to the country every year. The World Bank reports that people from other countries sent $69 billion (2.8% of GDP) to India in 2017.
“If Facebook launches the stablecoin they are reportedly building, it will quickly become the most used product in crypto,” tweeted Anthony Pompliano, founder of Morgan Creek Capital Management, “WhatsApp has over 200 million users in India alone. The Indian government has been fighting crypto too so things are about to get very, very interesting.”
The number of WhatsApp users in rural India doubled in 2017 following decline in the cost of data and internet in the region.
Third, the stablecoin will likely be centralised. “At best, it will be a digital dollar-equivalent,” says Murad Mahmudov, “However, most of the dollars in the world already exist exclusively in digital form.”
“We know Facebook has billions of dollars parked overseas,” says Travis Kling, chief investment officer at Ikigai Asset Management, “Those cash balances could potentially be used to facilitate the buildout of a stablecoin ecosystem across jurisdictions – creating a sort of alternative banking system. This is especially interesting for the billions around the world that have access to a smartphone but do not have access to a functional system or a stable fiat currency.”
The WhatsApp messaging app will not be the first to integrate cryptocurrency on its platform. In August, LINE, a Japanese messaging app became one of the first publicly traded companies to have launched its own blockchain mainnet with a cryptocurrency called the LINK token.
