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.