Facebook is working on making the FaceCoin cryptocurrency that will let users transfer money on its WhatsApp messaging app, focusing first on the remittances market.
The company is developing FaceCoin as a stablecoin, a type of digital currency pegged to the US dollar, to minimise volatility.
This is not Facebook’s first venture into virtual currencies, payments, or P2P payments via messenger app. Facebook Credits, its previous virtual currency, launched in 2011 was quietly sunset two years later Remember Facebook Gifts, launched in 2012 and sunset two years later in part because, to quote Josh Constine, Editor TechCrunch, “Facebook never found a way solve distance and localisation problems to make Gifts work internationally”. And of course Facebook Messenger Payments launched in the US in 2015 and expanded to Europe two years later.
So what sets FaceCoin apart? Just because Facebook launches a stablecoin cryptocurrency for P2P payments doesn’t mean people will use it.
The trouble with stablecoins for payments, as it stands, is that businesses don’t accept them, so you have to convert them back into a fiat currency, like dollars, euros, GBP etc. in order to buy any thing.
But as a remittance service? Yes, as a remittance service that connects 2 billion people around the world on the same Facebook platform – that may just work.
Remittances are a massive market, and somewhat of a holy grail of cryptocurrencies, and WhatsApp is widely used worldwide. Remittances are the obvious target market here. And it would be huge, and important, and marketplace changing if Facebook were to make remittances 10 times cheaper and faster.
This would however require much more than fast international stablecoin transfers, because those stablecoins are not legal tender at their destination.
If though, as has been reported, Facebook established relationships with cryptocurrency exchanges worldwide, or became or sponsored exchanges themselves – this could be game changing.
Large parts of the world are already deeply invested in mobile money. Imagine if FaceCoin could be seamlessly converted into M-Pesa or Orange Money immediately upon receipt. Then you could buy FaceCoin for US dollars in Houston, send it to your brother in Ghana, and when he wants to spend it, he just pushes a button on his phone to convert it at the day’s rate into his mobile money account, courtesy of Facebook’s Ghanaian exchange partner, in exchange for a tiny percentage of that rate.
That would be a huge deal. First, it would offer seamless, immediate, user-friendly international remittances, which itself would be massive – the remittance market is roughly half a trillion dollars a year. Second, it would allow anyone with a phone and the Facebook app to maintain a personal account in stablecoins backed by a basket of hard currencies.
Facebook is far from releasing the coin, because it’s still working on the strategy, including a plan for custody assets, or regular currencies that would be held to protect the value of the stablecoin, but if they do intend (intentionally or not) to get into the remittance market, the ramifications could be huge.
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