Facebook buys into the cryptocurrency buzz – report

Reports suggest Facebook is in the process of developing its own cryptocurrency, with plans to launch in as many as a dozen countries as early as Q1 2020.

According to the BBC, not only has the product been given a name, GlobalCoin, but CEO Mark Zuckerberg has met with Bank of England Governor Mark Carney. The cryptocurrency could be unveiled to the world by the end of the year, with plans to kick off operations during the first quarter of 2020.

It would appear this is one of the more radical ideas from Facebook to differentiate its business, removing the dependency on the increasingly under-fire data sharing economy. With the general public, regulators and governments all taking more pro-privacy stances, the fundamentals of the data-sharing economy are coming under-threat. Numerous companies will face significant disruptions with the introduction of stricter regulations, though Facebook is one of the most exposed to the threat.

While the idea of virtual currencies is not particularly new, real-world applications will escape the imaginations of most. In this example, Facebook may want to move towards a more dominant position in the digital economy, enabling purchases through its various different products. Cryptocurrency will become an important facet of this process, firstly to encourage people to purchase through the products instead of going directly to the advertiser, and secondly, allowing people without bank accounts to engage in eCommerce. There is the potential to inspire confidence in purchases from previously unknown websites and vendors.

Although it is a perfectly reasonable ambition for Facebook executives to hold, there will be numerous sceptics around the world. Facebook has not necessarily shown itself as a particularly resourceful custodian of personal information; asking people to trust them from a financial perspective would require a huge amount of credibility in the brand. This might prove to be a stumbling block for the social media giant.

Another factor to consider is how unregulated the cryptocurrency market currently is. In the UK, cryptocurrency is not recognised as legal tender, while many in the general public have little understanding of the concept. Both of these factors might undermine confidence in any virtual payments system, at least in the immediate future.

This is not the first time Facebook has ventured towards the world of virtual currency however. In 2011, Facebook introduced Facebook Credits, which it hoped would replace traditional means of paying for in-app products on the platform. In 2012, Facebook announced it would no-longer use its own money system and officially canned the project in September 2013. A lack of traction with the general public undermined the idea.

Hints were also dropped of Facebook’s ambitions in May 2018, when the firm announced it had hired David Marcus. Marcus, who previously was a member on the board of directors of Coinbase and President of PayPal, has been leading blockchain projects in the business.

Zuckerberg has not been shy about his ambitions to enter the financial fray, telling the audience at a developer conference last month the payments world was an attractive one. For Facebook, this is a logical move. Considering the widespread adoption of its platforms (Facebook, WhatsApp and Instagram) and consumer trends to favour digital purchasing over real-world transactions, it is in a good position.

The platform also needs to become more attractive to consumers. Trends over the last few years suggest people are spending less time on the core platform. The introduction of more functional features, such as eCommerce, could be a way to diversify the business. However, the focal point of the argument moving forward will be around security.

Facebook will need to prove that the cryptocurrency is firstly secure, but also that its own data storage and processing capabilities meet the privacy and data protection demands of today’s digital society. This is where it might fall short of expectations.

AT&T starts accepting cryptocurrency to pay bills

AT&T has announced it’s the first US operator to accept cryptocurrency from its customers to pay their bills.

Now forward-thinking AT&T punters can use bitcoin and that sort of thing to reward AT&T for providing all that lovely connectivity if they feel like it. Specifically they can do so via the BitPay platform, which AT&T considers ‘a respected cryptocurrency payment processor’, when they pay online and through the app.

“We’re always looking for ways to improve and expand our services,” said Kevin McDorman, VP of AT&T Communications Finance Business Operations. “We have customers who use cryptocurrency, and we are happy we can offer them a way to pay their bills with the method they prefer.” BitPay doesn’t seem to have made a public statement, but it’s presumably pleased.

This seems to be part of a growing trend, at least among US tech-related companies. Earlier this year mega distributor Avnet said it had embraced BitPay to the corporate bosom. “We’re working with BitPay to facilitate secure blockchain payments for all types of customers so they can focus on developing their products, not how to pay for them. Whether it’s Bitcoin or Bitcoin Cash, we can handle it,” said Sunny Trinh, VP of demand creation at Avnet at the time.

Not everyone thinks this is such a great idea however. TNW notes that connecting one of your bitcoin addressed to your phone number, and thus your personal data, might not be for the best. It also reminds us that a UK locksmith which started accepting bitcoin four years ago has yet to enjoy a single cryptocurrency transaction. So this move seems to be more about future-proofing than responding to any immediate demand from the market.

JP Morgan launches its own cryptocurrency but don’t get too excited

JP Morgan has created the first cryptocurrency to be backed by a U.S. bank but you can’t buy any and it’s not obvious what the point of it is.

“The JPM Coin is based on blockchain-based technology enabling the instantaneous transfer of payments between institutional accounts,” said an announcement based on gibberish-based grammar. In essence this seems to be a digital mechanism designed to speed up the movement of money within JP Morgan’s systems, nothing more.

They gave the exclusive to CNBC, which also got to chat to Umar Farooq, head of JP Morgan’s blockchain projects, who likes to start his sentences with ‘so’. “So anything that currently exists in the world, as that moves onto the blockchain, this would be the payment leg for that transaction,” he said. “The applications are frankly quite endless; anything where you have a distributed ledger which involves corporations or institutions can use this.

“Money sloshes back and forth all over the world in a large enterprise. Is there a way to ensure that a subsidiary can represent cash on the balance sheet without having to actually wire it to the unit? That way, they can consolidate their money and probably get better rates for it.”

So in essence JP Morgan is offering to exchange their client’s dollars for cryptocurrency tokens representing exactly the same amount, which it reckons they’ll be able to move around more easily. This is quite a different concept to something like bitcoin, which has seen massive fluctuations in its value against the dollar. One JPM Coin will always be worth one dollar.

JP Morgan’s Q&A sheds a bit more light on the matter. It has much more in common with stablecoin than cryptocurrency in that it’s strictly pegged to the dollar, so it’s basically a digital IOU. The big difference is that JPM Coin is private and only available to JP Morgan institutional customers. Once again: the main point of it is to reduce settlement times, nothing more.

Right now JPM Coin is still in its prototype phase and the stated use-case feels like a bit of an anti-climax for people hoping this signifies the next phase of the cryptocurrency revolution. Maybe the such a public endorsement of the technology by a big establishment name will catalyse something, but it’s unlikely to be the kind of total financial autonomy for the individual dreamt of when bitcoin first arrived on the scene.

AT&T faces $224 million legal battle over cryptocurrency theft

Precedent means a lot in the legal world, and with large segments of cryptocurrency still unexplored, there might be a few keeping an eye on AT&T’s progress in this interesting case.

In a filing made to the US District Court in Los Angeles, cryptocurrency investor Michael Terpin is suing AT&T for $224 million following the theft of $23.8 million in cryptocurrency tokens. While AT&T did nothing directly associated with the theft, Terpin is holding the telco accountable for SIM swap fraud.

“Somebody needed to sue AT&T for fraud & gross negligence in letting criminals SIM swap. I just did,” Terpin said on Twitter.

SIM swap fraud allows nefarious individuals to trick service providers into transferring a subscriber’s phone number to a SIM card which is in that persons possession. Once the fraudster has access to the SIM, the new device can be used to reset passwords and access online accounts. With some services still reliant on phone-based authentication, it can be a very effective way to drain accounts or move assets.

The practise involves a lot of research, as security questions asked on the phone can defeat this scheme, though considering the questions are usually quite obvious it isn’t fool proof. With so much of our lives online, enough Googling on an individual would certainly build a profile. In this case, as the founder of BitAngels Terpin would have been interviewed numerous times and had countless articles written about him. The profile could have been bulked out further.

Once this profile has been built, the fraudster would call the service provider claiming a lost phone and asking the account be transferred to a new SIM in that persons possession. Assuming the security questions could be answered, the fraudster would then effectively have free reign over the victims virtual identity.

In this case the end result was the loss of cryptocurrency tokens. Alongside recovering the $23.8 million, Terpin is also seeking $200 million in punitive damages. The complaint details AT&T had been previously contacted about such instances of fraud, and since not enough has been done to prevent fraud, it should be held accountable.

The dangers of online identities have been well-publicised, but as there have been few major, real-world examples of the dangers, many ignore the risks. In truth, we do not know how dangerous it can be to freely publicise such vast quantities of personal information online for anyone to see. This is just one example, but as fraudsters probe for weaknesses, we suspect such stories will become more common.

The issue here is about negligence and indirect contribution to the scheme. This is the position AT&T finds itself in. For the telco world, it could be viewed as critical for AT&T to win this case and set precedent.

As this is one of the first mainstream cases, judges in the future will use this as an example to make rulings in the future. If AT&T finds itself on the losing side, telcos throughout the US may find themselves much more exposed to the nefarious activities in the dark corners of the internet.

The internet offers wonderful opportunities for many around the world, but every now and then it is worth being reminded there are dangers in the un-explored regions of the web.