Even though Cryptocurrencies have experienced downward pressure on their prices, big-tech companies and social media platforms like Facebook and Telegram are already experimenting with digital tokens.
They want to leverage their digital know-how, an existing customer base of million users and their human resources to venture into the cryptocurrency space.
Facebook Set to Launch Its own Digital Coin
According to ‘The New York Times’ report, Facebook is planning to issue digital coins that will help users send money through messaging platforms.
Facebook owns Whatsapp, Messenger, and Instagram. Collectively, these apps boast a user base of a whopping 2.7 Billion people.
When these users who live across the world, from developed countries like the USA to developing Asian economies, can transfer money from a smartphone to another, it will have a far-reaching impact on retail payments.
Interestingly, this digital coin will be a ‘medium of exchange’ but not a store of value, i.e., a stablecoin- a digital currency pegged to the U.S dollar. This will make it unappealing to speculators, but this does have the potential to change the retail payments space in the world.
It was always rumored that Facebook would venture into Financial services. David Marcus, former president of PayPal, has been with the company since 2014.
Big-tech Companies, Be It in the West or East Are Eyeing the ‘Financial Space’
History does repeat itself. Just look at the Fin-tech revolution that took place in China.
Chinese internet companies gradually ventured into financial services. Some of the prominent ones are Baidu, Alibaba and Tencent. BAT, as they are known, forayed into providing financial services only after they had a sufficient user base from their earlier operations. Alibaba group owned Ant Financial at $150 Billion is valued more than Goldman Sachs.
Interestingly they all started differently.
Baidu is a search engine, Alibaba had a humble beginning in 1999, and within a span of 20 years, it has become one of the top ten valued companies in the world.
Clearly, we are experiencing a pattern here. Technology companies offer something unique by leveraging technology, garner a substantial user base and then make an entry into financial services.
This is not new. Just last month, it was reported that JP Morgan is set to launch its own digital coin. Such mainstream adoption by Facebook, JP Morgan will definitely help the case of cryptocurrencies notwithstanding, Berkshire Hathaway CEO Warren Buffet’s continued tirade against Cryptocurrencies.
Digital Coins May Increase ‘Financial Inclusion’
Also, Telegram- another instant messaging platform with around 300 million monthly active users is also planning to issue its own coin-GRAM. Also, Kakao- South Korea’s largest internet conglomerate is also working on the same.
Unlike the developed world, many emerging economies and developing nations have an opaque traditional financial system even though they have active monthly users of popular instant messaging platforms like Whatsapp, Instagram, Wechat and so on.
There are around 1.7 Billion people in the world who are “Unbanked.” It means they do not have access to even a basic savings account in a bank. As the World Bank report states:
“Globally, 1.7 billion adults remain unbanked, yet two-thirds of them own a mobile phone that could help them access financial services.”
This provides Social Media companies like Facebook with enormous potential to plan something like a digital coin which can give access to Finance to such “unbanked” persons.
But a word of caution here. This is not the first time that Facebook has dabbled in the financial space. Previously it had launched Facebook Credits and Facebook Gifts only to be shelved two years later.
It remains to be seen how a social media company undertakes this to become one of the most important payments companies in the world.