Facebook is reportedly planning to launch its own cryptocurrency within Whatsapp, which would allow users to frictionlessly transact with one another through the service without incurring fees.
According to Bloomberg, the new cryptocurrency will initially focus on the remittance market in India, where there are hundreds of millions of Whatsapp users and most financial transfers today are made via mobile payments. It's worth noting however that this coin won't be a typical cryptocurrency, it will be a 'stablecoin'.
Some kind of move into payments for the social media giant has been predicted ever since it appointed former PayPal president David Marcus to run its Messenger app in 2014. In May 2018, Marcus was then appointed to head up Facebook's blockchain initiatives.
He also sat on the board of crypto exchange Coinbase up until August 2018.
Another report from the New York Times suggests that this coin launch is expected to take place in the first half of 2019. Reportedly, the company has also spoken to exchanges about supporting the launch of the coin.
But Facebook is not alone in this space. Telegram, the secure messaging service favoured by crypto enthusiasts, Isis, and drug dealers alike, is also planning the launch of a within-app cryptocurrency soon, and so is its rival Signal.
Initially focusing in India makes perfect sense for Whatsapp because there are less established payment structures in place than markets such as the US or the UK. In fact, although cash is still king in India, uptake of mobile technologies is spreading rapidly meaning that Whatsapp-enabled payments could enjoy fast and extensive market penetration.
At of last year, the country boasted a $400bn (£290bn) mobile wallet market, dominated by Paytm, India's biggest mobile payment company (part owned by Alibaba and Japan's Softbank) which has over 300 million registered users.
By launching in India first, Facebook is following in the footsteps of Google, who launched Tez (now named Google Pay), the company's first mobile payment service in India in 2017 before expanding into other countries.
Right now, there are reportedly 40 million monthly active users of Google Pay in India. What does Facebook's move signal? That the company aims to start competing with mobile payment services in India? Is this simply a trial ahead of a global launch?
It's hard to say exactly what Facebook is planning, but this fits neatly into the company's aim to infiltrate every aspect of our daily lives and become increasingly indispensable.
Stablecoins are crypto coins with values pegged to that of an already existing currency or security. As the name would suggest, this ensures that the values of these coins are not subject to the wild fluctuations that affect currencies like bitcoin and ether.
Instead, the value of these coins only fluctuates at the same rate as the currency they are tied to, which is in most cases the US dollar. However, according to the New York Times, the Whatsapp coin would be pegged to a range of different foreign currencies.
Due to these features, stablecoins have proved popular recently, with a large number of new coins being launched in the past year. However, there have also been some high-profile flops, such as Tether and Basis, and the most used coins continue to be the older, more traditional forms of cryptocurrencies.
However, the financial clout and impressive technological know-how of Facebook may signal a new lease of life for the stablecoin market. The impact that this coin were to have if successful could be vast, given Facebook's huge potential reach into a receptive market of 2.4 billion monthly users.
But would these coins, linked to vast conglomerates such as Facebook, be truly decentralised as other cryptocurrencies are? It's likely that these coins would incorporate the best bits of crypto but probably be set up in a way as to be less decentralised than other coins.
This could involve privileging the Facebook management teams in decisions about the coin. Therefore, this would represent a departure from a truly decentralised world of cryptocurrency.
It's also unlikely these coins would be based on the same intensive 'proof-of-work' model that Bitcoin mining is based on, and instead may be closer to the premissioned blockchain networks popular in the enterprise.
This to some extent depends how they orchestrate the model of the currency and its infrastructure. For coins that have been launched before, ICOs have been held where interested investors or people who would like to transact buy into a set amount of coins in exchange for whatever the value of the coin was at that time (something which has typically been set by demand).
The stable coin approach means that demand is less of a decisive factor, because value should remain steady regardless. However, if Facebook is creating a currency out of nowhere, then offering it to people in exchange for fiat currencies, the company will undoubtedly be making profit from the initial stages of the endeavour at least.
According to Bloomberg, the new cryptocurrency will initially focus on the remittance market in India, where there are hundreds of millions of Whatsapp users and most financial transfers today are made via mobile payments. It's worth noting however that this coin won't be a typical cryptocurrency, it will be a 'stablecoin'.
Some kind of move into payments for the social media giant has been predicted ever since it appointed former PayPal president David Marcus to run its Messenger app in 2014. In May 2018, Marcus was then appointed to head up Facebook's blockchain initiatives.
He also sat on the board of crypto exchange Coinbase up until August 2018.
Another report from the New York Times suggests that this coin launch is expected to take place in the first half of 2019. Reportedly, the company has also spoken to exchanges about supporting the launch of the coin.
But Facebook is not alone in this space. Telegram, the secure messaging service favoured by crypto enthusiasts, Isis, and drug dealers alike, is also planning the launch of a within-app cryptocurrency soon, and so is its rival Signal.
Why?
Initially focusing in India makes perfect sense for Whatsapp because there are less established payment structures in place than markets such as the US or the UK. In fact, although cash is still king in India, uptake of mobile technologies is spreading rapidly meaning that Whatsapp-enabled payments could enjoy fast and extensive market penetration.
At of last year, the country boasted a $400bn (£290bn) mobile wallet market, dominated by Paytm, India's biggest mobile payment company (part owned by Alibaba and Japan's Softbank) which has over 300 million registered users.
By launching in India first, Facebook is following in the footsteps of Google, who launched Tez (now named Google Pay), the company's first mobile payment service in India in 2017 before expanding into other countries.
Right now, there are reportedly 40 million monthly active users of Google Pay in India. What does Facebook's move signal? That the company aims to start competing with mobile payment services in India? Is this simply a trial ahead of a global launch?
It's hard to say exactly what Facebook is planning, but this fits neatly into the company's aim to infiltrate every aspect of our daily lives and become increasingly indispensable.
What is a stablecoin?
Stablecoins are crypto coins with values pegged to that of an already existing currency or security. As the name would suggest, this ensures that the values of these coins are not subject to the wild fluctuations that affect currencies like bitcoin and ether.
Instead, the value of these coins only fluctuates at the same rate as the currency they are tied to, which is in most cases the US dollar. However, according to the New York Times, the Whatsapp coin would be pegged to a range of different foreign currencies.
Due to these features, stablecoins have proved popular recently, with a large number of new coins being launched in the past year. However, there have also been some high-profile flops, such as Tether and Basis, and the most used coins continue to be the older, more traditional forms of cryptocurrencies.
However, the financial clout and impressive technological know-how of Facebook may signal a new lease of life for the stablecoin market. The impact that this coin were to have if successful could be vast, given Facebook's huge potential reach into a receptive market of 2.4 billion monthly users.
But would these coins, linked to vast conglomerates such as Facebook, be truly decentralised as other cryptocurrencies are? It's likely that these coins would incorporate the best bits of crypto but probably be set up in a way as to be less decentralised than other coins.
This could involve privileging the Facebook management teams in decisions about the coin. Therefore, this would represent a departure from a truly decentralised world of cryptocurrency.
It's also unlikely these coins would be based on the same intensive 'proof-of-work' model that Bitcoin mining is based on, and instead may be closer to the premissioned blockchain networks popular in the enterprise.
Will Facebook make money from this?
This to some extent depends how they orchestrate the model of the currency and its infrastructure. For coins that have been launched before, ICOs have been held where interested investors or people who would like to transact buy into a set amount of coins in exchange for whatever the value of the coin was at that time (something which has typically been set by demand).
The stable coin approach means that demand is less of a decisive factor, because value should remain steady regardless. However, if Facebook is creating a currency out of nowhere, then offering it to people in exchange for fiat currencies, the company will undoubtedly be making profit from the initial stages of the endeavour at least.
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Francisco Gimeno - BC Analyst This is going to be a very interesting experiment on stable coins and remittance use cases. We are eager to see how other more established platforms like Google Pay and in Africa Mpesa et alia react to this. However, this is just a speck of what will happen when the 4th IR disrupt traditional banking. Governments and Central Banks are just realising this.