INSUBCONTINENT EXCLUSIVE:
If Bloomberg and the New York Times are to be believed, later this year Facebook will introduce a cryptocurrency which will allow WhatsApp
users to send money instantly
Yes, that right: Facebook
Earthquake! Revolution! The world is tilting on its axis! The end times are cometh!
Except & um & what exactly are people going to do with
FaceCoin, once they receive it
This is not Facebook first venture into virtual currencies, payments, or peer-to-peer payments via messenger
Remember Facebook Credits, its previous virtual currency, launched in 2011 and sunset two years later Remember Facebook Gifts, launched in
2012 and sunset two years later (there a theme here) in part because, to quote the redoubtable Josh Constine, &Facebook never found a way
solve distance and localization problems to make Gifts work internationally& And of course Facebook Messenger Payments launched in the US in
2015 and expanded to Europe two years later.
But FaceCoin is different; FaceCoin is on a blockchain
(As a longtime blockchain enthusiast I feel I have earned some right to be a bit sarcastic here.) And FaceCoin is reportedly a stablecoin
backed by a basket of fiat currencies, a la the SDRs of the IMF.
So it on a blockchain
What does a blockchain give you Well, conceivably, smart contracts, but if it a backed stablecoin used for P2P transfer, it hard to see how
Also, conceivably, privacy
Right now the crypto world offers stablecoins (Dai, Paxos, etc.) and privacy coins (ZCash, Monero, Grin) but — weirdly — nobody offers a
If Facebook were to do so, that would, in fact, be a genuinely big deal
Not least because:
On one end, a completely private and encrypted messaging service tied to an open, Zerocoin-like, zk-SNARK backed
cryptocurrency and backed by a tech giant would instantly become the go-to mechanism for global money laundering, tax evasion, and just
general criming.
— Alex Stamos (@alexstamos) February 28, 2019
Conversely, if FaceCoin isn&t private:
On the other, without
mathematically-backed privacy features having all of this data in one place would be a massive source of security and privacy risk, and a
huge boon for countries with leverage over FB to get data access.
Wow, gonna be an interesting couple of years.
— Alex Stamos
(@alexstamos) February 28, 2019
…although that assumes that it actually widely used, an outcome which is, to say the least, far from
Again, just because Facebook launches a stablecoin cryptocurrency for peer-to-peer payments doesn&t mean people will actually use it
Remember Facebook Credits
Remember Facebook Gifts.
The trouble with stablecoins for payments, at least at the moment, is that businesses don&t accept them, so you
have to convert them into fiat currency, like dollars or euros or cedis or what-have-you, in order to actually buy things like groceries or
True, Facebook could offer goods and services for purchase themselves in exchange for FaceCoin, but then it would basically be Facebook
Credits all over again.
But remittances! you cry
Remittances are a massive market, and a holy grail of cryptocurrencies, and WhatsApp is widely used worldwide
Remittances are the obvious target market here
And it would be huge, and important, and wonderful, if Facebook were to make remittances 10x cheaper and faster … but that would require
much more than fast international stablecoin transfers, because, again, those stablecoins are not legal tender at their destination, and I
don&t know if you&ve noticed but businesses tend to have this whole thing about receiving legal tender.
So, yes, it great if you can send
five thousand FaceCoin to your family in Ghana for an 0.1% fee
But then your family in Ghana has to somehow convert them to cedis at an exchange — a task which is, as of this writing, likely to be
slower, much clumsier, far more user-hostile, and very possibly even more expensive than the usual medium(s) of remittances.
If Facebook can
bulldoze that obstacle, though — then we&re talking about a big deal.
I see two possibilities
One is to establish partnerships with other companies such that they will accept FaceCoin themselves, so it becomes valuable outside of
But I can&t see this working
Again, it still not legal tender; it infeasible to partner with everybody; and it just adds more complexity for the user — &wait, do I
want to pay for this with FaceCoin or cedis Wait, do they even accept FaceCoin Hmm, how does my government feel about FaceCoin and taxes, I
wonder& — , and the global WhatsApp audience rightly doesn&t want to deal with this
They just want money they can use.
But the other alternative is for Facebook to establish relationships with cryptocurrency exchanges
worldwide, or — even more dramatically — become or sponsor exchanges themselves
Remember, much of the world already uses mobile money extensively
Imagine if FaceCoin could be seamlessly converted into eg M-Pesa or Orange Money immediately upon receipt
Then you could buy a thousand FaceCoin for US dollars in Houston; send it to your brother in Ghana, at the speed of the Internet (or maybe
in a few minutes, depending on how FaceCoin blockchain works); and when he wants to spend it, he just pushes a button on his phone to
convert it at the day rate into cedis in his MTN Mobile Money account, courtesy of Facebook Ghanaian exchange partner, in exchange for a
tiny percentage of that rate.
That would be a huge, huge deal
First, it would offer seamless, immediate, user-friendly international remittances, which itself would be massive (the remittance market is
roughly half a trillion dollars a year.) Second, it would allow anyone with a phone and the Facebook app to maintain a personal account in
stablecoins backed by a basket of hard currencies
Ask any Venezuelan or Zimbabwean, or for that matter Argentinian, why that would matter.
That would also be insanely messy from a legal /
There are security issues
There are liquidity issues
There are KYC / AML issues
There are regulatory issues involving not just one, or a few, but conceivably hundreds of regulatory domains
But if anyone has the reach and money and wherewithal to push that armada of boulders up this hill, it Facebook — and the carrot of
collecting, say, a few dozen basis points from the $500 billion/year remittances market is more than enough to incentivize them to do so.
I
There a very good chance that FaceCoin will just be Facebook Credits meets Facebook Gifts, except on the blockchain for no particular
reason, in which case it too will presumably fade sheepishly away to be sunsetted two years after it launches
And even if I&m right, I too am deeply uneasy about Facebook, who have repeatedly shown themselves to be the opposite of trustworthy,
becoming the global gateway for remittance payments worldwide
(Although, hey, it could arguably be even worse.) Maybe their blockchain will be sufficiently decentralized to be somewhat decouple from
their influence, but that seems awfully unlikely (and would be pretty undesirable to regulators).
But if I&m right — then this is actually
a really big deal, one which could be meaningfully important on a very personal and day-to-day level for many millions of people worldwide
Facebook would be, to my mind, at very best a deeply flawed messenger of this change … but they&re still (probably) better them than
nobody, and, importantly, if they were to blaze this trail, it would then be much easier for others to follow.
