Should we be excited about Facebooks own digital currency?
With 350 ‘Tikkies’ (easy app tos end payment requests via Whatsapp) and 1100 ‘Ideal’ (Dutch standard for internet payments) payment, being processed in The Netherlands, we’re belonging to one of the most cashless societies worldwide. When we look to countries like Congo (Africa), where government workers are still paid with stacks of cash from a truck and several South-American countries, where most people don’t have a bankaccount but have pigs in their backyard that act as savings account, the situation is totally different.
Globally, over 2 billion people don’t have a bank account, according to the Worldbank. In some South East Asian countries, this ammount is 25% of the inhabitans, whereas in some African countries it is only 10%. While cash is still king in some countries, in some countries alternative payment solutions like M-Pesa, where money transactions are being send between mobile phones, are very popular. In Kenya, 50% of the GDP is being send via M-Pesa and 95% of the inhabitants has access to it.
In 1976, Friedrich Hayek wrote in his book ‘the denationalization of money’ about setting up competing currencies, that would start a battle about the monopolies of central banks. It looks like, Facebook CEO Marc Zuckerburg has read this book during the many sleepless nights he definitely has had in the past months, which have been devastating for his company. The scandals keep on being revealed and several governments ar grilling the company legally. In The Netherlands, 600.000 users closed their account and the users that remained, are using the platform less intensive, impacting the financial results. Not even thinking about all the advertisers that walked away.
New projects should give the company not only a more positive image, but could also provide new revenue streams. The company knows all details of our personal live and could, with all the data they have, rund some very interesting and effective services. After the announcement that the company will focus on the datingmarket (a $10 billion market), project ‘Libra’, with which the company would like to create an own digital currency, has gained momentum at rapid speed. The ‘GlobalCoin’ will be a so-called ‘stablecoin’ (which I explained in a previous blog), linked to several currencies like the Dollar and Euro. It is the second try of the company making an own digital currency, after it silently killed project ‘Facebook Credits’. Zuckerberg described the purpose of this coin as:
“it should be as easy to send money to someone as it is to send a photo”.
The project has been officially registered in Switzerland, the company currently has conversations with the American and British government about the necessary regulation and would like to launch the coin already this month (earlier reports told 2020) in 18 countries. The businesscase is offcourse very interesting, as one third of the world populations logs into Facebook at least once a month and in countries like India, 80% of the SME’s are using Whatsapp to promote goods. Because of the European PSD-2 regulations, it is furthermore very easy to obtain financial details from consuments and fort he 8.5 million websites and shops, using the Facebook Login, it should be very easy to accept payments with one click. Users could furthermore be paid in the ‘GlobalCoin’, for watching ads on the platform, just like the Brave browser is facilitating already for all websites. All though the company is denying, it is almost completely inspired by already working solutions of the Asian companies AliPay and WechatPay, which are currently bigger and mightier then Chinese banks and creditcards.
When we zoom into development countries, you see where the ‘GlobalCoin’ will have siginificant effect. Several academic research reports have shown that financial inclusiveness (having an own digital savings account etc), can significantly contribute to both the country’s economic growth and accomplish the UN Social Development Goals. McKinsey found that this can even add $3.7 billion tot he GDP of development countries in the upcoming 10 years. Furthermore, over halve a trillion Dollars of so-called ‘remittance payments’ (payments between for example workers abroad and their families at home) was send in the past year, where transaction costs of these -often Western banks- are ranging from 8–12 and sometims even 30%. Imagine how significantly lowering these costs (Facebook is thinking about a fee of 1%) would impact the receivers of these payments in development countries.
Directly implement this ‘GlobalCoin’ globally, would most people say, based on the things mentioned above. But we almost forget the reason why all the latest scandals surrounding the company started. It is known as the largest ‘data slurper’ and because of the unconventional and irresponsible way of how it is sometimes using this data. Photos of the nice team outing are not that exciting, but research done by the Dutch Central Bank, shows that Dutch citizens see their financial data as very privacy sensitive. Would you like to give all this data to a company, being known because is it using all possible ways to commercialize your data and often blames others for acting savely?
Cryptocurrency fanatics are very positive about the project, as they think it will kickstart the mass adoption of cryptocurrencies. If only 2% of the 1,5 billion daily Facebook users will use the ‘GlobalCoin’, it would double the current global amount of cryptocurrency users. The project will face lots of hurdles; from regulations and demographic problems (the userbase is getting old very fast). For me it is another new, devastating step, in losing our privacy. The businessmodel of Faceboom has, notwithstanding all scandals, still huge conflicts of interest with its own interests and those of its users. Conflicts I see growing, with their new services, like the ‘GlobalCoin’.
Jan Scheele is CEO van International Blockchain Solutions en CEO van Blockformer Global.