2020 Facebook and Cryptocurrency

2020 Facebook and Cryptocurrency

In an amazing announcement in May, Facebook stated that they are entering the blockchain and cryptocurrency market in 2020. No less than 50 Facebook employees have been working on this new venture for over a year. By April 2020, Facebook plans to set up digital payments in about 12 countries. Its leader, Mark Zuckerberg, has already discussed the issues, operational and regulatory, that could hindrance the introduction of this new Facebook offering. In this process, he spoke to the Bank of England governor, Mark Carney and to the US treasury. It should be noted that the US Senate banking committee has raised questions about the Facebook consumers’ privacy. It is now down to Mark Zuckerberg to address legal, regulatory and privacy concerns.

Currently, this cryptocurrency is known as “GlobalCoin”. More details about it will come forth during the summer of 2019.  Facebook added services will allow users to convert currencies into digital coins and to transfer money over its WhatsApp’s messaging application. A new company, called Libra Network, with Facebook Global Holdings as its stakeholder, was registered in Geneva on the 2^nd May. This new company will provide financial and technology services as well as developing required hardware and software.

Ironically, Facebook, back in January 2018, came up with a blanket ban on all ads associated with bitcoin when at the same time starting to work on its own cryptocurrency. This ban was quickly lifted in June of the same year. The original concerns that ads were used for fraud was the original reason for the ban. However, this was most likely a poor decision as instead of a blanket ban, an approach based on customer safety and education would have been more desirable.  Fundamentally, this blockchain technology is leading to fundamental changes in the financial world. Something that Facebook cannot just ignore. Facebook, at one time, also seriously looked at taking over Coinbase with its 10 million customers. But does Facebook need Coinbase? As Facebook has more than 2 billion users, then the answer is most likely no. Indeed, the creation of Facebook own cryptocurrency then makes sense.

An interesting aspect to Facebook approach is the question asked by Zuckerberg regarding centralisation versus decentralisation: “With the rise of a small number of big tech companies, many people now believe technology only centralises power rather than decentralises it”. Decentralisation lays with technologies such as encryption and cryptocurrency that put the power back in people’s hands. However, it is unclear if GlobalCoin will be decentralised like bitcoin even though cryptocurrencies are open, decentralised, censorship resistant and without border.

So, the question is how GlobalCoin will work. First, the GlobalCoin will most likely be pegged to a small number of established currencies such as the dollar and the euro. This approach will avoid the price volatility issues that bitcoin suffers from. Facebook will also use WhatsApp and Instagram as transactional means.

Not only Facebook aspires to become a giant in the cryptocurrency field, but it also intends to compete with China. Facebook is currently banned in China. China has been moving forward with its own social networks and messaging services as well as having its own payment systems with Allpay and WeChat. To keep this competition at bay, Facebook cryptocurrency may be the only resource Facebook has to efficiently get the upper hand.

Therefore, tomorrow Facebook users will be able to make payments without having to worry about card details, passwords and bank fees. This will be, apart from standing out as a major benefit to Facebook users, another step toward the cashless society whereby only a code QR will be required. This will also be another nail in the coffin of nations which are struggling with their debts as they will not have any control of what Facebook do.

If cryptocurrency was beneficial to people’s freedom, there is a worry that Facebook will not support this liberty at all.  This is the dark side of this monetary revolution. When using Facebook, no one has any real ownership of what they posted, etc…. Why would this be different with cryptocurrency as every transaction will become trackable. The real danger is that Facebook takes over people’s life to the extent that no one will be able to live without having a Facebook account. Facebook could become beyond being a social media, a state-free enterprise which would control all our activities from finding a job, buying goods, etc... This will be the end of privacy on a scale never seen before. In this future, Facebook could well then be renamed, and quite rightly too, Big Brother.