Posted on Friday May 31, 2019
Facebook has recently announced that it is to launch its own form of crypto-currency to around a dozen nations during the first few months of 2020.
Known simply as GlobalCoin, this new form of crypto-asset will be targeted at the social media platforms existing audience of users to enable them to use digital currency to make affordable and secure payments whether or not they hold an existing bank account.
Facebook is clearly very serious about this payment system, as they have already sought assistance from Bank of England Governor Mark Carney and sought advice on operational and regulatory issues from the US Treasury.
Currently, crypto-assets are seen as fairly niche investment or payment platform and the sector tends to be occupied by fairly experience investors and end users.
However, with the launch of GlobalCoin Facebook could be about to open up the door to crypto-assets becoming an everyday affair for even the most novice user.
In doing so Facebook could transcend its position as just another social media company to one day compete with banks for customers, which the company hopes will reduce consumer costs.
Under plans for the project, Facebook aims to initially join forces with banks and brokers to change dollars and other international currencies into its digital coins.
It is also apparently in talks with some e-commerce sites to accept the currency as payment for a lower transaction fee than those offered by banks and other credit providers.
It has not yet been revealed whether or not the new platform will be public like bitcoin or run as a private service.
This new crypto currency is likely to be a potential game changer given Facebook’s 2.4 billion users. However, fears are growing that this new service could be used to mine consumer spending data, which could then be sold to advertisers using Facebook in order to target individual users.
Facebook is already facing pressure for its mining of data, especially in light of the scandals (privacy and data breaches), such as Cambridge Analytica, which have affected the brand during the last year.
The tech giant could also face challenges with blockchain and privacy and data rights when it comes to transactions. The fact that information stored on the blockchain is impossible to remove (without deleting the blockchain itself) raises important questions in light of GDPR which offers individuals the right to be forgotten.
It is not clear how are Facebook going to comply with a request of this nature if they cannot remove personal information stored on the blockchain that is linked to a person’s individual Facebook account.
If Facebook can pull this off this successfully it could be a massive win for the social media platform. But they will have to contend with the issues already identified as well as matters relating to money laundering and illegal activity.
Unfortunately, with so little known at present about GlobalCoin key questions still remain, such as:
- How easily will GlobalCoins be acquired?
- What and how can they be used?
- And will they be classed as E-money?
This final point will be very important for Facebook as it could decide whether the currency is underpinned by strict regulation.
While these questions may persist, what is clear, is that if Facebook can make this system work then it could be one of the most disruptive influences in finance since the growth of credit cards in the 1970s.
If you have any queries regarding crypto-assets or blockchain, please contact Thomas Hulme.