The intense scrutiny that a company like Facebook comes under, coupled with the sense the corporation is more than just business, means that rumour and speculation go hand in hand with almost any statement put out by the tech giant.
A couple of months ago, as reported by Bloomberg, Facebook sent out a memo with the following bottom line “Facebook is exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications. We don’t have anything further to share”.
The final line, “we don’t have anything further to share”, has not stopped a huge among of speculation and conjecture about what Facebook intends to do in cryptocurrency, and what the goals are with its “Project Libra”. For many, the most pertinent question is if you will be able to buy this so called “Facecoin” in the same manner, say, that you can buy Bitcoin.
Facecoin will likely aim for stability
The most likely answer is ‘yes’. Although, “Facecoin” (the name has been applied by the press, rather than Facebook) is expected to be fixed against a major currency, like the dollar, or perhaps a combination of major currencies. The idea is that the cryptocurrency will not be subject to the volatility that can attract Bitcoin traders looking to make fast profits.
Indeed, while there has been lots of media speculation over Facebook and cryptocurrency, more fuel has been added to the fire when the Wall Street Journal recently reported that Facebook was actively recruiting financial firms to start exploring a viable route to developing the cryptocurrency for the social media platform.
Part of the reasoning applied to this move by Facebook is transform its payments platform, allowing its users to buy the new token, and use it to make payments across Facebook and other internet sites. For Facebook the attraction might come with the elimination, or lowering, of processing fees by traditional payment companies.
Low cost cross-border payments could be key
At the moment, transaction fees are quite low – almost costless – with traditional payment methods if those transactions are end-to-end in the same currency. It becomes expensive at the point of exchange from one currency to another. That’s especially important in a region like Africa, and a crypto-payment that helps money flow in cheaply from abroad could be significant.
Other cryptocurrencies, specifically Ripple, have been designed to facilitate low cost cross-border payments, but it’s clear Facebook doing something similar could provide access on a completely different scale.
Yet, media reporting has stopped short of saying that Facebook’s payment system will be anything like, for example, WeChat Pay, the Chinese-backed internet payment solution that allows scanning an instant payment through smartphones. It’s been a social phenomenon in China, with the media focusing on the slogan, “even beggars have QR codes.” But it should be noted that WeChat Pay still relies on traditional banking, not using any cryptocurrencies.
Obviously, Zimbabwe has its own challenges with regards to an innovation like this, and it’s not as if people will be pinging Facebook tokens to each other on the streets of Harare. However, these types of innovations, especially if Facebook is able to stabilize the value of the token, could be embraced in Zimbabwe and other parts of Africa which have been hurt by hyper inflation in the past.
Of course, all of this is still just speculation. We are still waiting for Facebook to clearly define its goals for cryptocurrency. But as it stands, don’t expect the excitement over “Facecoin” to die down any time soon.