Facebook Will Probably Launch a Cryptocurrency in the First Half of This Year, but it Looks to Be the Polar Opposite of Bitcoin (BTC), Rather it May Be a PayPal and Visa Competitor

March 6, 2019 / by Zachary Mashiach

There is increasing hype and speculation regarding a theoretical Facebook Coin, which may become a reality in the first half of 2019. Indeed, Facebook has been ramping up the size of its blockchain team to about 50 employees.

The blockchain team is working in a building where regular Facebook employees do not have access in order to maintain secrecy, but information has been supposedly leaked to the New York Times.

Apparently, the focus of this team is to create a cryptocurrency for WhatsApp, a popular online phone app owned by Facebook. Further, this cryptocurrency is apparently so far along that Facebook is in talks with cryptocurrency exchanges to coordinate the launch. But cryptocurrency enthusiasts, traders, and investors must be aware of the specifications of Facebook Coin before getting excited since Facebook Coin is nothing like Bitcoin (BTC).

Facebook to Launch Stablecoin That Could Compete With Fiat Payment Networks

It appears that Facebook Coin will be another stablecoin pegged to fiat currency, much like Tether (USDT) and USD Coin (USDC). Perhaps the only unique thing about Facebook Coin versus a regular stablecoin is that it could be backed by a basket of fiat currencies, all held in Facebook bank accounts.

If this is true, certainly Facebook Coin could be quite competitive with the rest of the $2-3 billion stablecoin market. The biggest stablecoin, Tether (USDT), has had major trouble in the recent past maintaining a bank account. This caused Tether (USDT) to decline as much as 10 percent below the value of a U.S. dollar, tarnishing its reputation. Presumably, Facebook Coin will never have problems with its bank account. That said, USD Coin (USDC), which is operated by Circle and Coinbase, probably will not have banking problems either.

Since Facebook Coin would be a stablecoin, it will not be possible to invest in it. This is quite different from Bitcoin (BTC) and most other cryptocurrencies, which have fluctuating prices, making investing and day trading possible.

If Facebook were to launch a cryptocurrency that was not a stablecoin, it could be one of the biggest initial coin offerings (ICOs) of all time. It is curious that Facebook is not going this route since it would likely make billions of dollars. However, Facebook’s stock has a market cap of $463 billion as of this writing, 3.56 times more than the total crypto market cap of $130 billion.

So Facebook is perhaps not interested in the billions of dollars it could make on an ICO. It appears Facebook is most interested in creating its own payment network independent of Visa and PayPal.

With Facebook’s immense user base, such as payment network could be highly competitive with PayPal, Visa, and all other fiat payment networks. Choosing to use a stablecoin rather than a regular cryptocurrency for this payment network would eliminate market volatility, making it easier for users to treat Facebook Coin as money and not worry about selling it as soon as they receive it.

Essentially, instead of reaping low hanging fruit with an ICO, Facebook is probably launching a stablecoin so it can build a world-class payment network, which may be much more profitable than an ICO in the long term.

Further, this Facebook payment network will be unique out of all the other big name fiat payment networks since it will use blockchain technology.

Is Facebook Coin a Scheme to Gather User’s Identification Information?

The most dramatic difference between Bitcoin (BTC) and Facebook Coin is that the latter will require a complete identity verification procedure. Bitcoin (BTC) does not require any identity verification. Should Facebook Coin fail to follow know your customer (KYC) and anti-money laundering (AML) laws, it would be breaking the law. Bitcoin (BTC) circumvents these laws since it is totally decentralized and not operated by any company or entity.

There is some negative speculation that Facebook’s long term goal with Facebook Coin is to collect a massive amount of customer identification information. Facebook does not charge money for using its services, and it has been said that the customers of Facebook, WhatsApp, and Instagram are the product. Indeed, Facebook was recently embroiled in the Cambridge Analytica data scandal, where data from 87 million users was harvested for political purposes. The sentiment that Facebook Coin is another chapter in Facebook’s user privacy breaches is just speculation and opinion, however.

Overall, the stablecoin being launched by Facebook may pave the way for billions of people worldwide to use a blockchain payment network instead of Visa or PayPal. However, users of this new payment network need to realize that Facebook’s cryptocurrency very different from Bitcoin (BTC) since it will not be suitable for investment, it will not be decentralized, and it will not be anonymous.