Bloomberg and New York Times have reported that Facebook is developing its very own cryptocurrency and will release it at the end of this year. This cryptocurrency will let WhatsApp users send money to each other instantly, which is a platform owned by Facebook.
This isn’t the company’s first trip down the crypto alley. It introduced Facebook Credits back in 2011, but that was shut down just two years later. Facebook also launched Facebook Gifts in 2012 which was shut down two years later.
Their latest cryptocurrency, which is dubbed the ‘FaceCoin’ is different from the other virtual coins from Facebook as this will be based on the blockchain. FaceCoin will also be more stable than other cryptocurrencies as it will be backed by a bunch of fiat currencies to keep its value stable on the market.
The blockchain is the technology that allows peer-to-peer lending via smart contracts. It is relatively more secure than other forms of payment as it is protected in a network of thousands of computers. Facebook will be one of the first companies to offer a private -stablecoin in the crypto market, which is a genuinely good idea as other cryptocurrencies either focus on privacy or stablecoins, but not both.
This latest news should be taken with a pinch of salt though. Even though Facebook may be releasing its FaceCoins, it does not necessarily mean that people will start using it widely.
The big drawback for private stablecoins is that most businesses across the developed world do not accept them as a form of payment. So, people will have to convert their virtual currency into fiat currency in order to use them like the US dollars or the Euro. This will prove to be a big hassle for Facebook to overcome if they wish to encourage its users to adopt the FaceCoins for their day-to-day transactions like paying for the groceries or hitching a ride on Uber.
Facebook could target the remittance market with their virtual coin as WhatsApp is widely used by people all over the world, and some of them need a reliable source to send their money back to their loved ones. If Facebook can target this massively growing market, and make it faster and cheaper to send remittances beyond borders, then FaceCoins will have a real value proposition for its users. But, even that would prove to be challenging for Facebook, as most businesses only accept legal tender, and virtual coins are not deemed to be legal tender at the moment.
So, the idea of sending FaceCoins instantly to your loved ones may prove to be an enticing idea, but then your loved ones will have to figure out how to convert the FaceCoins into their local currency, which is an infinitely clumsy and slow process. If Facebook can somehow find out a way to bypass these hurdles, then people will start gobbling up the FaceCoins faster than the speed of light!
Facebook could either make their FaceCoins appear valuable to its consumers or enter into partnerships with other companies, such that their FaceCoins could be converted seamlessly for people to access them readily. People who use WhatsApp just money that they can actually use rather than a virtual coin which only exists in the virtual world.