Facebook’s plan to launch its own cryptocurrency could see its founder Mark Zuckerberg bury the hatchet with two of his biggest enemies – the Winklevoss twins.
Dubbed GlobalCoin and set to launch in 2020, the Facebook cryptocurrency will allow users to make digital payment via the social network and via Facebook-owned messaging platform WhatsApp.
In April, Zuckerberg made it clear that payments are a key part of Facebook’s future. But to get there, Zuckerberg may have to revisit his past.
In 2004, venture capitalists Cameron and Tyler Winklevoss sued Facebook founder Mark Zuckerberg, claiming he stole their idea to create a social networking site while the three were studying at Harvard.
The brothers ultimately received a $65m settlement in cash and Facebook shares. Facebook is now worth over $500bn.
In 2014 they launched Gemini, a digital currency exchange. And that’s where the paths of Zuckerberg and the Winklevoss twins appear to be crossing again.
As the news broke of Facebook’s cryptocurrency plans, the Financial Times reported that Facebook has held talks with “at least two cryptocurrency exchanges”, citing sources familiar with the matter.
One of those is Coinbase. The other is Gemini.
Very little is known about what those discussions entailed. Facebook has required all parties involved in talks to sign non-disclosure agreements and both firms declined to reply to the FT’s request for comment.
Facebook cryptocurrency: Why Winklevoss?
But we can speculate how a partnership between the long-time rivals might work.
With Facebook’s 2.38 billion monthly users, the tech giant undoubtedly has the reach to spark a true mass adoption of cryptocurrency.
“[Facebook’s cryptocurrency] could sway public opinion and drive more mainstream interest, getting people to look more closely at the practical benefits of cryptocurrency instead of seeing it as, say, a gambling tool,” says Andy Bryant, chief operating officer at Tokyo-based cryptocurrency exchange bitFlyer.
But, following a string of privacy scandals, Facebook’s reputation has taken quite a hammering – a potential stumbling block for it to become more like a financial institution.
Regulators have already voiced concerns about Facebook’s market dominance, with prominent figures (including Facebook co-founder Chris Hughes) calling for the social media giant to be broken up. Those regulators, and perhaps Facebook’s users, are unlikely to be quick to trust it with billions in cash.
By contrast, Gemini has strong ties with financial regulators. It is overseen by the New York State Department of Financial Services. In 2016 it became the world’s first licensed ether exchange and the brothers are influential figures in the crypto community.
Gemini and Facebook – similar goals
Making a separate and trusted company such as Gemini or Coinbase the custodian of user funds could be a shrewd move for Facebook to proceed with its cryptocurrency plans.
And it is a plan that broadly aligns with that of the Winklevoss twins. The pair have long believed that cryptocurrency is the future of payments. Recent moves, such as a trial of in-store crypto payments at selected stores, highlight their ultimate aim. Facebook’s vast user base could help them realise that dream.
However, Facebook could be interested in more than Gemini’s focus on being a credible, regulation-friendly exchange, says Bryant, who speculates whether the Winklevoss twins’ large Bitcoin holding could be a factor at play.
“Will this bitcoin asset base somehow be tied to the new Facebook coin? Surely it won’t be a ‘bitcoin-backed’ token? The plot thickens,” he says.
“In any case, the Gemini discussion seems to make it clear that Facebook’s ambitions for their cryptocurrency go beyond simply using it in their ‘closed ecosystem’ (albeit a large one), to make something that will be fungible and tradeable more widely.”
For Zuckerberg, partnering with his rivals could also reflect a maturing of his character. Historically, the Facebook chief has been known to have a somewhat cutthroat approach to his competition. While an undergraduate and working with the Winklevoss twins, he reportedly messaged a friend that he was going to “f****” the brothers, “probably in the ear”.
And in 2011, when Google launched Google Plus (then seen as a potential rival to Facebook) Zuckerberg reportedly put his company into lockdown and compared Facebook’s battle with Google to the Romans destroying the Carthaginians.
Whether the eight years since the last legal action between Zuckerberg and the Winklevoss twins is long enough to let bygones be bygones, only three of them can know. But ultimately, business is business – and a Facebook-Gemini partnership could prove extremely lucrative for both parties.
A crypto olive branch could be the beginnings of a true revolution in digital payments – assuming Zuckerberg has no plans for any ear-related deceit.