Facebook is ramping up their cryptocurrency project called Project Libre. Their plan is to implement a stablecoin within the Facebook ecosystem (Facebook, WhatsApp and Instagram). A stablecoin is a cryptocurrency that is pegged to an asset or another currency in order to smooth out the volatility we’re used to seeing with most other cryptocurrencies.
Facebook’s new currency is reported to be called GlobalCoin and it could have far-reaching effects on its 1.5 billion users by allowing them to send and receive money at nearly zero-cost (today, money transfer fees can range from 9% to 29%). Remittances (sending and receiving money to friends and family) reached $689 billion dollars in 2018. In India alone, migrants sent $69 billion dollars back home – and this is exactly the population that Facebook is targeting. The Indian government’s policy has been hostile towards cryptocurrency in general, so this will be an interesting development.
The finance industry is getting ready to go through a rapid change. Jamie Dimon, the CEO of JP Morgan, has made clear this sense of inevitable change to his shareholders, “Silicon Valley is coming”.
It’s reported that Facebook will launch their cryptocurrency as early as Q1 in 2020. If successful, it will instantly become the most used cryptocurrency in the world. This would effectively turn Facebook into a bank. Users who do not have a checking/savings account could simply store their money in their Facebook wallet. This is why cryptocurrency is such a massive disruptor. The question is, should you trust the Facebook bank?
The problem is we can’t even trust our current banks. Too long have they practiced predatory lending and imposed excessive fees on the users and merchants. They have grown out of control and we almost saw them collapse our economy in 2008. The banks wield too much control and we need to wean ourselves off them.
With cryptocurrency, money is no longer issued and created solely by governments, nor are the payment channels primarily handled by a handful of mega-banks. Any well-equipped garage-geek with a can-do attitude can now create their own currency, and program the currency to behave in any way they wish.
Facebook’s approach will be centralized, and pegged to multiple different currencies. Unfortunately for Facebook, they’ve been in the spotlight for massive privacy violations. They have also attempted to implement a digital currency once before and failed. Whether or not they can be trusted should be intensely debated. This may work for some people, but we need to ensure we have other viable options or the whole point of decentralization is lost.
We can easily imagine a truly decentralized and democratized currency. A monetary system that implements an adequate version of universal health care and can execute some form of universal basic income if necessary. We can democratize the voting process on how it is funded and how it functions.