The Crypto Craze: Facebook To Launch Its Own Cryptocurrency
June 17, 2019
2 min read
What's going on here?
This week, Facebook plans to reveal details of its cryptocurrency, called “GlobalCoin”. The coin will be in circulation by early 2020 and is to be used across 12 countries. Facebook CEO Mark Zuckerberg hopes GlobalCoin will allow Facebook’s 2.4 billion monthly users to send money as easily as sending a photo.
What does this mean?
The proposal (called ‘Project Libra’) will allow users to change international currencies into digital coins. The plan is being discussed with US Treasury officials, money transfer firms like Western Union and payments giants like Visa and Mastercard, to develop a safe, cost-effective way for people to send and receive money.
GlobalCoin will be a ‘stablecoin’ type, so it’s a currency of set value. This means that it will not be subject to volatile fluctuations and can be used to buy items on the internet, in shops or outlets. The social media giant is also looking into paying users fractions of a coin for viewing ads and has been working on a cryptocurrency that would allow users to transfer money via WhatsApp.
With this new venture, projections show that GlobalCoin could earn Facebook anywhere between $3 billion and $19 billion by 2021.
What's the big picture effect?
With Facebook’s massive base of global users, it could instantly become a major competitor to banks and payment processors worldwide. However, there are challenges Facebook must overcome for GlobalCoin to be successful.
First, by sponsoring its own payment system, Facebook can mine data on user spending patterns. As the company has a poor track record for protecting user data, it will be difficult to convince users and regulators that Facebook can keep such information safe. So, Facebook must find a secure way to issue, store and transfer GlobalCoin, otherwise it may fall foul of privacy and anti-money laundering regulations.
Second, Facebook already attempted to introduce a payment service in the United States via its Messenger app, which was later discontinued due to lack of popularity. The service was introduced after WeChat, a major Chinese competitor of Facebook, launched its own in-app payment service which boasts 600 million users. Facebook must therefore analyse why its Messenger payment service was unsuccessful and put strategies in place to avoid the same fate with GlobalCoin.
One thing’s for sure though, if Facebook’s service takes off, it has the potential to revolutionise the way we send money.
Report written by Evania D
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