Most people don’t even know it’s there…
Off a road called “Hacker Way” south of San Francisco, California, there’s a secluded building.
Inside, 50 Facebook programmers are working on a secret project that could forever change the way the world looks at crypto.
You see, they have a singular goal: creating and launching a Facebook cryptocurrency.
We don’t know what it’s going to be called yet (I’ll refer to it as Facebook coin for now). But we do know it’s expected to launch in the first half of 2019. And the Facebook coin network could become the world’s largest payment network overnight.
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The next 2.7 billion crypto users
Media reports say Facebook will launch a stablecoin – which is a crypto that’s tied to the price of the U.S. dollar. That means the value of each Facebook coin will always be worth US$1.
The coin will launch first on messaging platform WhatsApp. And reports say it will first target India’s remittance market – that is, people who live abroad and are sending money back home. India’s the world’s biggest remittance market. People sent US$69 billion to the country in 2017. Facebook wants a cut of that.
And the company has the scale to get it.
Facebook hired David Marcus, who was president of online payments company PayPal and a board member at one of the world’s largest crypto exchanges, to lead the project.
After rolling out to everyone on WhatsApp, Facebook can add its coin to its own messaging platform, Messenger, and photo-sharing app Instagram.
Put it all together, and Facebook coin could soon be available to more than 2.7 billion people. That’s about 65 percent of the 4.2 billion people who have internet access. And it’s more than 75 times the number of verified crypto users (there were 35 million in 2018).
Facebook joins a growing market
Last week, IBM announced it’s created a way for banks around the world to issue their own stablecoins on the Stellar (XLM) network (check out Crypto Capital for more on Stellar). Six banks have already signed on, including Brazil’s largest bank Banco Bradesco.
Another of the world’s largest banks, U.S.-based JPMorgan Chase, also recently announced its own stablecoin. But there are important differences between it and Facebook coin. JPM Coin runs on a private network that can only be accessed by JPMorgan’s handpicked clients.
By fencing JPM Coin off from the rest of the world, it’s not much more than a digital credit.
One of crypto’s biggest strengths lies in the fact that its open and accessible to users around the world.
Facebook understands that all too well. It tried to launch its own credits system in 2011. Dubbed Facebook Credits, it failed miserably – but not for lack of trying.
Facebook made it easy to buy credits online. They also rolled out gift cards at hundreds of thousands of brick-and-mortar stores around the world. Walmart carried them. So did GameStop, Tesco and Best Buy.
Few people bought them. There are a lot of reasons that Facebook Credits failed, but the biggest one was there wasn’t much you could do with them. You could use them for purchases in games, but you couldn’t send them to friends, and there were few real-world items you could buy with them.
The failure was exactly the slap in the face that Facebook needed. The company now realizes it MUST cede some control over its coin if it wants it to succeed.
So Facebook has been meeting with crypto exchanges. It appears that it wants them to give users a way to buy Facebook coins. If users can buy Facebook coins on a crypto exchange, the system will be far more open than Facebook Credits, JPM Coin and Facebook’s current payments system (which relies on debit cards and is limited to a handful of countries).
In theory, it also means users could spend Facebook coin outside of Facebook’s apps. They could swap them for their own local currencies or bitcoin on a crypto exchange like Binance. One day, users might even be able to send their Facebook coins to, say, their Netflix accounts to pay for streaming video.
Facebook coin could literally become a proxy or stand-in for actual U.S. dollars.
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Stepping out of the shadows
Half of me hates the idea of a Facebook coin. Crypto was designed to eliminate the need for government and bank-controlled money. It enables us to send money peer to peer without intermediaries like Facebook. (My colleague Eric Wade isn’t crazy about Facebook coin either.).
But crypto can’t go mainstream if it’s not easy to use. Creating an account has to be easy. Sending money to someone has to be easy. Swapping from one currency to another has to be easy.
Right now, the market is fragmented. If you do decide you want to purchase crypto, it’s hard to know where to start and which companies to trust.
Facebook could change that overnight. Users already have Facebook accounts. And most of them use them every day. With a single update to its applications, Facebook will give those users an easy onramp into the crypto world.
No longer will cryptos be perceived as a tool for scammers and scofflaws. They’ll be recognized for what they are: a form of truly global money that’s fast, secure, inflation-proof and free from government manipulation.
Facebook shut down its credits program in 2013. Just five years later, it’s going after the payments market again. And this time, signs point to a network that’s radically more open.
On exchanges, users will be able to swap Facebook coin for cryptos or their own local currencies. As they become more accustomed to cryptos and their advantages, I believe they’ll increasingly choose cryptos – especially as the use-case for cryptos grows.
That’s why I believe now is the perfect time to start investing in cryptos.
Cryptocurrency Analyst, Stansberry Pacific Research