Facebook has not had a fun year in 2018, but despite negative press and its “on again, off again” affair with cryptocurrencies, rumors of an affection for the benefits of blockchain technology are no longer rumors. The social media giant has established an internal “Tiger Team” to leverage the innovative power of the blockchain alongside of its active global base of account holders, estimated to be 2.3 billion at last count. Insiders are leaking plans that entail an initial trial of a cross-border payment service for repatriation of funds overseas back to India. The service will utilize Facebook’s WhatsApp, blockchain infrastructure, and possibly a “Stablecoin” in the making.
Per a Bloomberg report: “The Indian remittances market is significant. According to data from the World Bank, the country received nearly $69 billion dollars in foreign remittances in 2017, or 2.8 percent of the country’s GDP. WhatsApp enjoys widespread popularity in India, with over 200 million users in the country. The number of users in rural India doubled last year as data, and Internet costs in the region declined”.
Facebook’s love affair with cryptos and blockchain has been more like a dysfunctional reality show during this year. After many public attacks related to privacy and for enabling fraud, the social media giant quickly banned all ads have anything to do with the world of cryptocurrencies. It did recant in June by limiting its ban specifically to Initial Coin Offerings, the timing of which followed closely after a decision to form an internal group devoted to crypto and blockchain ideas.
In May, the firm re-assigned David Marcus, PayPal’s former president and current leader of Facebook’s Messenger service. Marcus, an avid supporter of cryptocurrencies, subsequently departed the board of Coinbase, citing potential conflicts of interest. In his own words, his mission was spelled out for him: “After nearly four unbelievably rewarding years leading Messenger, I have decided it was time for me to take on a new challenge. I’m setting up a small group to explore how to best leverage Blockchain across Facebook, starting from scratch.”
The word on the street is that he has already formed a unit of blockchain developers, now totalling at least forty individuals. The obvious choice of a payment service to enable “P2P” transfers had been rumored since May, and more than likely, the idea may have caused a few sleepless nights for executives over at Visa and MasterCard. Cross-border payments contribute a significant source of revenue for both companies and the banks that they service.
Leaked details suggest that Facebook is considering a “Stablecoin” approach to ensure that volatility does not influence the store of value proposition of the token. Stablecoins are a type of cryptocurrency where the value is tied to a fiat currency, like the U.S. Dollar. There are still many kinks to be worked out, and no one is suggesting that the new product will hit the market anytime soon.
One likely issue that must be solved is how would an Indian recipient of Stablecoins easily convert those coins to Rupees, the domestic fiat currency of India. In order to capitalize on the potential of foreign exchange revenues, Facebook would need to control the flow of funds from the final blockchain address to the recipient, which typically would involve a bank. If Facebook wants to sidestep the banking establishment, they will need to get more creative, possibly including a domestic payment service, as well, a process that will take time.
As one reporter noted: “Facebook’s Year From Hell continues, but its crypto ambitions appear to remain very much alive.”