Commentary: Will Facebook’s new cryptocurrency be a good or bad thing?

At the Facebook developers conference in April, Mark Zuckerberg told the audience “I believe it should be as easy to send money to someone as it is to send a photo.” It looks like it soon will be.

Facebook announced that dozens of employees have been creating the new blockchain application on which it can run its own cryptocurrency. The project, called Libra, has attracted funding from leading payments and tech industry players such as Uber, Mastercard, Visa and Stripe.

The mission of Libra, as gleaned from Mark Zuckerberg’s incorporation of a company called Libra Networks in Switzerland in May, is “investing, payments, financing, identity management, analytics, big data, blockchain and other technologies” according to a report from Reuters.

Facebook says that the purpose of the new currency, which according to the BBC will be called GlobalCoin, is to reach areas that the company has penetrated but that do not have access to banking services or where government-backed currencies are volatile. The idea is that anyone in the world who has access to Facebook will now also have access to a medium of exchange that will allow them to participate in the global marketplace.

The crypto token will be available for use on Facebook and just as importantly it will be available through Facebook apps, including Messenger and WhatsApp. These apps, especially WhatsApp, have become the de facto communication systems for some nations. In fact, Messenger and WhatsApp have a combined 2.8 billion users in 180 countries worldwide. 

WhatsApp is an easy to use platform that allows users to make calls, text and video calls using wi-fi. According to the website Business of Apps, India is the largest market for WhatsApp with up to 300 million users, followed by Brazil with around 120 million users. The U.S. is a relatively small market for WhatsApp due to ubiquitous cell service, but Messenger has around 126 million users.  

It will work with governments, not around them

While the impetus of the burgeoning cryptocurrency industry has always been to serve as the foil for traditional government-backed fiat currencies, Facebook has been working with governments to gain acceptance of its cryptocurrency. In order to lower barriers for participation, Facebook has been asking countries to waive restrictions such as proof of passport requirements that are normally in place in order to move money in some countries.

Furthermore, it is not only online that Facebook is planning to permit access to its cryptocurrency. The company has been talking with merchant services providers around the world, incentivizing them to allow their merchants to accept the cryptocurrency.  Furthermore, the company plans on introducing ATMs that allow for the cryptocurrency to be brought into the physical world.

Facebook has relinquished complete control over the project and several large firms including Uber and Stripe have paid $10 million each in order purchase a distributed node on the blockchain’s underlying token. The companies will help to run the digital currency and will serve as a foundation for oversight, thus negating any possible criticism of Facebook as over-controlling. The move is meant to bolster Facebook’s pivot to privacy. Recently the company announced it intends to prioritize private communications through methods of encryption. The move to crypto fits in perfectly; blockchains are appealing for their transparency and because each party in the transaction can retain anonymity through the use of code name assignment. 

Blockchain technology allows for open and honest exchange but with personal data protection, both of which have been issues that Facebook has been accused of playing fast and loose with in the past.

Facebook currently has around 2.13 billion users. The formal launch of GlobalCoin is expected in 2020 after a testing phase beginning this year. The official announcement about the cryptocurrency is pending.