According to the news report by Bloomberg, Facebook Inc. is working on developing a cryptocurrency that will allow the transfer of money through the company’s WhatsApp messaging app. Reportedly, the company is going to first target the remittances market in India.
The newsroom cited people who were familiar with this matter and wished to remain anonymous since these plans were still private, stating that the social media giant was developing its own stablecoin.
A stablecoin is a type of cryptocurrency which is anchored to a fiat currency, such as the US dollar or the Euro (for example) so that the volatility that impacts regular cryptocurrencies is minimized.
The concept of the stablecoin is that this digital coin would be far easier to use for regular and daily purchases than other cryptocurrencies such as Bitcoin since it would be much more stable and protected from the intense volatility of the cryptocurrency market.
According to these sources, Facebook is still only at the strategizing stage of this plan, which includes planning for custody assets, which are fiat currencies that are held to protect the value of the future stablecoin.
That Facebook will eventually move into financial services markets has long been an expectation, especially after the company hired ex-PayPal president David Marcus to lead the company’s Messenger app unit. Expectation rose when Marcus was also named the head of Facebook’s Blockchain initiatives division this May.
Since then, the company has been hiring a lot of people for this new division. According to employee titles on LinkedIn, the social media company has already hired around 40 people for its new Blockchain initiatives unit.
Facebook’s spokesperson issued a statement that like many other companies, they were also looking at ways to harness the power of Blockchain technology. The spokesperson said that this new team would be exploring various applications of the technology and that they did not have anything more to share at this point in time.
WhatsApp is Facebook’s encrypted messaging app for mobiles, which is hugely popular in India, boasting over 200 million users. India is also the world’s number one country in remittances. According to data from the World Bank, Indians across the world sent more than $69 billion home to India in 2017 alone.
2018 has seen a boom in the creation and launch of numerous stablecoins in the industry. According to the stablecoin tracking website, Stable.Report, at one point this year, there were over 120 projects registered related to stablecoins.
However, while the concept is great in theory, stablecoin projects have been much harder to carry out in reality. In recent weeks, one of the high-profile stablecoins called Basis shut down just 8 months after its launch.
The project, which was based out of Hoboken, New Jersey, stated that there was no way their stablecoin Basis could be classified as a currency, vis-à-vis its current classification as a security, which meant that the number of potential investors in the project was significantly reduced.
The collapse of the Basis project came despite having industry heavyweights such as Andreessen Horowitz as well as former US Federal Reserve Governor Kevin Warsh invest in their company.
Even the most well-known stablecoin Tether has been embroiled in controversy since its launch. The creators of this stablecoin have claimed that each token of Tether (USTD) is backed by one US dollar. However, the company has refused to be audited by the credible third party, raising doubts about its claims.
Facebook, with more than 2.4 billion global users, as well as over $40 billion in yearly revenues and much more experience in dealing with regulatory issues may have a better chance at developing a stablecoin that succeeds.