Last month, Facebook finally threw its hat into the ring and announced the launch of its own cryptocurrency – GlobalCoin – in 2020. GlobalCoin will be used to power a digital payment system that will soon be available in a dozen countries. The tests for its new digital coin will begin before the end of this year.
Facebook’s GlobalCoin aims to make payments affordable and accessible to all, including users without bank accounts.
The social media giant is currently seeking partners to make the project happen. Coinbase, arch enemies Gemini, and Western Union are among the names that could be involved in GlobalCoin’s development.
Mark Zuckerberg has also taken advice on operational issues for the cryptocurrency from international authorities. The Facebook founder has already met Bank of England governor Mark Carney as well as officials at the US Treasury.
A new payment system on the back of Facebook
Facebook is working with financial firms and online merchants to implement a cryptocurrency payment system. According to the Wall Street Journal, the company is looking to build all the necessary infrastructure on the existing network. Other possible collaborators include Visa, Mastercard, and First Data.
The new payment system can target a massive audience of over 2.3 billion users worldwide. That’s 65 times more than the existing 35 million cryptocurrency owners!
GlobalCoin could substitute credit card transactions for e-commerce and other companies that sell directly through the social network.
Not only could Facebook use GlobalCoin to power its marketplace, but it could disrupt international money transfers. The internet behemoth is looking to provide secure payments with low fees and even zero fees for payments between friends. The company is also looking at shaking up the remittance market.
Facebook aims to use GlobalCoin to make payments faster and cheaper for people without bank accounts as well. The company is planning to use physical terminals where people can use other currencies to buy the new token, much like a Bitcoin ATM.
There’s still no official statement, but speculations about sign-up bonuses and reward tokens for watching ads have already gone viral. Users could also benefit from zero fees when transferring funds via Facebook products, like WhatsApp or Messenger.
Facebook wants its own stablecoin
Facebook’s cryptocurrency will be a stablecoin. The company has been negotiating with financial institutions and brokers to stabilise the price of its new digital coin.
It plans to raise almost $1 billion from licensing fees to back the cryptocurrency. The company is looking to build up a basket of low-risk securities and several currencies from multiple countries to ensure the stability of the coin’s price.
This move would make GlobalCoin almost unique in a crypto market where most cryptocurrencies deal with hard-to-predict price fluctuations.
Another attempt to stop users from fleeing Facebook
This isn’t Facebook’s first attempt to launch a cryptocurrency. A whole decade ago, the social network introduced Facebook Credits. They were similar to a virtual currency that enabled people to buy items in Facebook apps. But the project failed after only two years.
However, this time around, Facebook seems to be taking things more seriously. On May 2, it registered Libra Networks – with Facebook Global Holdings as the stakeholder – in Geneva, Switzerland. The new organisation aims to provide “financial and technology services and develop related hardware and software”.
According to one report, the social media platform has lost 15 million users over the past two years. GlobalCoin and an integrated payment system built on the blockchain could be the key to keeping users on the network.
Will GlobalCoin counter Facebook’s trust issues?
There’s no secret to the fact that many users have lost trust in Facebook after several scandals over privacy issues. The company has had to deal with multiple actions from both the US and the EU regarding consumers’ rights.
Is this the right time for Facebook to launch a cryptocurrency? Not everybody seems to agree that the social media giant should handle financial data.
After the Wall Street Journal announced a possible Facebook cryptocurrency, the US Senate and Banking committee wrote an open letter to Mark Zuckerberg.
The Senate members questioned the way GlobalCoin would work and whether it meets all the legal and regulatory requirements.
Facebook will have to handle thousands of rules and regulations across all the countries where the project is launched. And yet, there’s still no guarantee people will trust Facebook with their money as they did with their personal data.
Final thoughts
Facebook’s GlobalCoin could disrupt the way people make online payments. The company already has an impressive number of users that could convert to the network to make payments and purchases online.
The biggest challenge for Facebook will be a lack of trust due to several privacy-related scandals. Will people trust Zuckerberg enough to start changing their cash for Facebook’s digital coin? That remains to be seen.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.