Facebook is Set to Create Its Own Cryptocurrency
According to The Sun newspaper, Facebook looks set to launch its very own digital currency in a bid to compete with some of the world’s most popular cryptocurrencies like Bitcoin and Ethereum. Although the social media giant is yet to give its planned cryptocurrency an official name, it’s rumoured that the new digital currency will be closely tied to the US dollar to protect it from potential crashes.
Facebook acquired the free, cross-platform message service, WhatsApp, for $19b in early February 2014, and it appears that the company plans to use WhatsApp to allow its users to trade currency with their friends.
Unlike major cryptocurrencies like Ethereum and Bitcoin which are highly volatile (as the recent market price slumps have more than sufficiently proved) and are, therefore, subject to sudden increases and decreases of up to 20%, Facebook’s cryptocurrency will be a “stable coin”.
Stable coins are cryptocurrencies that are linked to another stable asset such as the US dollar or gold. This means that they are low volatility and can thus be realistically used to pay for day-to-day items without any significant risk to the user.
In The Sun’s article of 21st December 2018, it alleges that the new digital currency will initially allow WhatsApp users to perform money transfers and electronic payments, but could potentially be used in future on other Facebook portals such as the buying and selling-oriented Marketplace.
US news site, Bloomberg, has also carried this story, and according to its sources, the new cryptocurrency will be trialed in India before going global.
India would seem a sensible choice for the trial as the country has over two hundred million WhatsApp users and the second-largest number of internet users (480m) in the entire world.
After Facebook hired the former president of Paypal (David Marcus) to run its Messenger application back in 2014, many people have been waiting for Mark Zuckerberg’s company to expand into the financial services sector.
Facebook has also been sourcing employees for its blockchain group according to new job titles that have been recently appearing on LinkedIn. When quizzed on the purpose of the new department, a company spokesperson would only say that they are “exploring ways to leverage the power of blockchain technology” via “many different applications”.
Some would say that the rumour of a new Facebook-led digital currency seems to tie in with the sudden change of the company’s former stance on cryptocurrencies. Up until mid-2018, the social media site had placed a controversial ban on advertisements for cryptocurrencies, which it claimed was done for anti-fraud purposes.
When the ban was lifted only five months later, many industry experts attributed the decision to Facebook’s finally recognising the potential of Bitcoin and other cryptocurrencies. At the time of the ban being lifted, eToro’s UK managing director told The Independent newspaper that Facebook, like many other “technology giants”, “are aware of the potential of blockchain technology to change the financial system fundamentally”. And, if the latest rumours are anything to go by, he was right.
By Laura Kilby