The world’s biggest social media company appears dead-set on launching its own cryptocurrency.
Facebook has yet to announce plans publicly but media reports on its crypto ambitions have emerged over the past six months, painting a partial picture of how the social network wants to capitalize on blockchain technology.
In short, a team led by former PayPal president David Marcus is building an asset-backed cryptocurrency, one designed to operate within the company’s existing messaging infrastructure (WhatsApp, Instagram and Facebook Messenger).
The most recent news on the project comes from the BBC, with the British outlet reporting that the cryptocurrency – called “GlobalCoin” internally – will launch in “about a dozen countries by the first quarter of 2020.”
However, the signs that Mark Zuckerberg’s company wanted to diversify into fintech first materialized as far back as 2017.
Below is a rundown of what is known so far about Facebook’s cryptocurrency.
Looking back, the first sign that Facebook was prepared to be very serious about distributed ledger technology came in December 2017, when David Marcus joined Coinbase’s board of directors.
At the time, Marcus was the vice president of messaging products at Facebook. This would have included two of the biggest messaging platforms in the world, Messenger and WhatsApp (which Facebook acquired in February 2014 for $19 billion).
Though giants in their category, neither of Facebook’s messengers have the payments functionality enjoyed by their top rival: China’s WeChat.
But Marcus was president of PayPal, the U.S.’s leading online payments company. He’s no stranger to solving this category of tech problems.
More importantly, the next clue that Facebook intended to take crypto seriously came in August 2018, when CoinDesk first reported that Marcus was leaving Coinbase’s board.
Marcus had been reassigned to focus on blockchain in May 2018. At the time, a Coinbase spokesperson told CoinDesk that Marcus had stepped down to avoid the appearance of a conflict of interest.
In December 2018, Bloomberg reported that Facebook intended to build a stablecoin. Stablecoins are a controversial kind of cryptocurrency that have comparably frictionless settlements as classic cryptocurrencies, without the price volatility.
Long thought to be impossible without excessive centralization (and perhaps even then), they became one of the hottest forms of cryptocurrency last year, as the most popular – Tether’s USDT – faced significant headwinds and investors poured resources into competitors such as Ampleforth, TrueUSD and the ill-fated Basis.
At that time, Facebook’s entry was reported as a WhatsApp-centered product, primarily focused on India. That might have only been part of it, or Menlo Park’s ambitions might have since expanded.
One source that had visited Facebook told CoinDesk that any doubts about whether the company wanted to do a stablecoin should be set aside. The same source told CoinDesk to look for Facebook to roll out the project with a broad group of noted cryptocurrency companies and leaders backing it, in order to allay doubts that it might be overly centralized.
The next month, the New York Times reported that Facebook wanted to unify Instagram, WhatsApp and Messenger. No doubt there are many strategic reasons to do this, but for person-to-person payments it also maximizes the universe of people that can exchange the company’s new cryptocurrency.
Early in February, Cheddar broke the news that Facebook had acquired a British blockchain company called Chainspace. Cheddar reported this as an “acqui-hire.” That is, it was more about hiring the people than acquiring Chainspace as a business.
That said, Facebook had also been acquiring talent the old-fashioned way: with a slew of blockchain-related job postings in early 2019.
Shortly thereafter, rumors swirled that Facebook was seeking investors to back its crypto efforts. Many Silicon Valley investors CoinDesk spoke to at the time had “heard” that Facebook was raising money, but details were sparse – especially given the exhaustive scope of Facebook’s non-disclosure practices.
At the end of the month, the first hints about timing came out. Those dates have since been pushed back, but readers also got a sense for how the company was operating.
Multiple sources have confirmed to CoinDesk that the social media giant really only talks about its blockchain efforts behind closed doors in Menlo Park, physically, and only after everyone involved has signed non-disclosure agreements.
Four people that had been briefed on the matter told the New York Times in February that Facebook had already spoken with leading crypto exchanges. In May, Coinbase and Gemini were specifically cited by the Financial Times as two Facebook had discussed listings with.
Another major development was Facebook’s announcement of a pivot to privacy, fully articulated by CEO Mark Zuckerberg at the company’s annual F8 event for developers.
“I believe it should be as easy to send money to someone as it is to send a photo,” Zuckerberg was quoted as saying during his presentation.
While not directly a cryptocurrency announcement, it does fit into the larger story. Zuckerberg described a future for Facebook where the public news feed is no longer the site’s main attraction. In fact, the site could become primarily a platform for millions of private conversations.
If this happens, however, end-to-end encrypted content would make targeted ads less feasible. By controlling a new kind of money, Facebook could establish monetizable experiences that could make up for lost advertising revenue.
It’s worth remembering, though, that a full 98 percent of Facebook’s $40 billion in revenue came from advertising in 2017. In March, a Barclays analyst said Facebook’s cryptocurrency could earn the company anywhere from $3 billion to $19 billion by 2021.
The rumors about Facebook seeking funding for the project first entered the public sphere in a tweet from Nathaniel Popper, a New York Times reporter.
But then the Wall Street Journal substantiated the claim in early May, indicating that Facebook was looking further afield than just venture capitalists. Facebook had met with payments firms such as Western Union and Visa, the Journal reported.
Meanwhile, Congress began to take notice of Facebook’s efforts and the company subsequently picked up two compliance professionals from Coinbase, with significant prior experience in banking and payments.
Other names started becoming publicly associated with the project, with CoinDesk breaking the news that a notable crypto-economist, MIT’s Christian Catalini, has taken a role at the company.
Then Reuters found that the social media giant had registered a company in Switzerland, Libra Networks, with Facebook Global Holdings as its stakeholder.
The name referenced what the Wall Street Journal had previously identified as a codename for the effort, “Project Libra.” That registration can be seen here, though it simply describes a company working on a combination of financial services products, with blockchain as a component.
Le Temps reported that the person helming Libra also runs Facebook in Switzerland, Majella Goss, which operates out of a Geneva coworking space.
Beyond the GlobalCoin moniker, the BBC reported that testing should begin by the end of this year and the currency itself should roll out in the first quarter of 2020.
Borrowing from the playbook of the Asian e-commerce stablecoin Terra, the BBC story suggests Facebook will seek discounts from online retailers for customers who use GlobalCoin. This could be mutually beneficial both to the retailers and Facebook, as payment services provided by credit card companies come with fees that eat into e-tailers’ profit margins.
Facebook image via Tobias Dziuba/Pexels
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