January 2, 2019
With an initial focus on the Indian market, Facebook is developing a cryptocurrency aimed for use on its WhatsApp messaging app. More specifically, sources said the company is developing a so-called stablecoin, which is pegged to the U.S. dollar to reduce volatility. The company is, however, still working on its strategy, meaning that debut of the coin is still some time off. In 2014, Facebook hired former PayPal president David Marcus to run Messenger, fueling belief the company was going to engage in financial services.
Bloomberg reports that, “in May, Marcus became the head of the company’s blockchain initiatives, which haven’t been discussed publicly in detail.” Facebook is not revealing details. “Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology,” said a Facebook spokesperson. “This new small team is exploring many different applications.”
In India, WhatsApp has 200+ million users who, said the World Bank, sent $69 billion home to India in 2017, making it the top country in the world in remittances. Stablecoins have seen an uptick this year, reported Stable.Report, which counted more than 120 such ventures “at one point.” Stablecoin is intended to be more stable than Bitcoin and its ilk, making it “far easier to use on daily purchases.”
But stablecoin is still subject to the vagaries of cryptocurrency. Andreessen Horowitz and former U.S. Federal Reserve governor Kevin Warsh invested in a Hoboken, New Jersey company that issued a stablecoin dubbed Basis. That cryptocurrency closed down after eight months, saying, “there was no apparent way around being classified as a security as opposed to a currency, which could significantly reduce the number of potential buyers.”
Another well-known stablecoin, Tether, “has also been surrounded by controversy,” because it refuses allow an audit to prove its creators’ assertion that each token is backed by one U.S. dollar.
According to Bloomberg, “Facebook, which has 2.5 billion global users, more than $40 billion in annual revenue and greater experience navigating regulatory issues, may have a better chance of making a stablecoin that sticks.” If it does succeed, “it would be the first large technology company to launch such a project.” Facebook is focused on India because of the opportunity provided by its 480 million Internet users; Forrester Research predicts that number will grow to 737 million by 2022. One obstacle is the company’s fraught relationship with India over the spread of fake news via WhatsApp that has led to violence.