US social media giant Facebook has announced plans for GlobalCoin, a cryptocurrency that is set to become the core payment technology on the company’s online platforms.
Set for launch at the start of 2020, GlobalCoin looks set to be used across Facebook, WhatsApp and Instagram, all of which are owned by the company.
But while cryptocurrency leader Bitcoin is often treated as an asset, and is subject to significant price volatility, Facebook is using the technology in a manner similar to other mainstream companies, such as JP Morgan, as a fast, low-cost way to enable borderless payments.
And in doing so, it seems to be set on creating the foundation for its own financial ecosystem that would further encourage online users to limit their digital activities to the confines of the online behemoth, and ultimately dominate payments in the digital space.
How GlobalCoin will be used by Facebook
At heart of what GlobalCoin offers is the ability to make low-cost secure payments regardless of whether the user has a bank account or not.
Set to be backed by a pool of major currencies, the Facebook cryptocurrency will be what is known as a stablecoin, which does not have the same highs and lows of cryptocurrencies such as bitcoin and so is better suited for day-to-day transactions.
Precise details remain limited at present, but Facebook is said to be in talks with a host of organisations, including Western Union, as well as seeking advice from the US Treasury and Bank of England governor Mark Carney.
The Wall Street Journal is also reporting that the social media giant is in talks with a number of high-profile online retailers to accept the Facebook cryptocurrency in return for reduced transaction fees.
Could the Facebook cryptocurrency become the leading online payment system?
All of this paints the picture of a sprawling range of financial services under the GlobalCoin umbrella, suggesting that Facebook hopes to make it the go-to currency for many users in the online world.
It is clear that users will be able to send and receive money across borders without the transaction fees associated with traditional methods, as well as make payments for goods and services, but the company may also encourage the use of the platform as a place to store money.
It could even expand its service to include other financial products, such as loans, in a manner similar to conventional challenger banks such as Monzo.
This could be particularly popular for users that do not have their own bank accounts, particularly in developing regions that Facebook has previously sought to target.
As of March 2019, Facebook reports having 2.38 billion monthly active users – more than a quarter of the world’s population. As a result, it is extremely well placed to become the leader in almost any space it enters – as long as it gains the support of its users.
For payments, this is particularly key as the right implementation of cryptocurrency technology would give its product advantages over some more traditional financial solutions.
Will users resist Facebook’s dominance?
However, while many will see the appeal in a Facebook cryptocurrency, others will be highly resistant to the social media giant becoming dominant in yet another space.
The Cambridge Analytica scandal already has significantly harmed the company’s reputation, with many now questioning how much power Facebook holds.
This has fuelled a growing movement to abandon the platform, although the company appears to be relatively undamaged by the issue at present.
However, a foray into the financial world could prove to be a step too far for some users – particularly if the company ends up partnering with organisations that have a negative public image in the process.
Ultimately the success or failure of GlobalCoin is likely to be down to how Facebook handles its launch – and how much of an improvement it is on existing options.