Facebook has begun talking to U.S. regulators about getting approval for its forthcoming stablecoin cryptocurrency, said to be referred to as “GlobalCoin” at Facebook.
This weekend, outgoing Commodity Futures Trading Commission (CFTC) Chair Christopher Giancarlo told the Financial Times [subscription required] that the social media giant was already in “very early stages of conversations” with his agency about its plans for a virtual currency.
Facebook has already reached out to other regulatory agencies, including the U.S. Treasury and Bank of England, and is planning to create a digital payment system in about a dozen countries by early 2020, according to BBC News. GlobalCoin is expected be pegged to a basket of fiat currencies such as the dollar, pound and euro.
Known internally as Project Libra, Mark Zuckerberg’s push into blockchain and cryptocurrency has been aggressive, hiring PayPal president David Marcus and opening talks with financial institutions including Visa and Mastercard, as well as payments firms such as First Data Corp. and Western Union, according to the Wall Street Journal [subscription required]. It has been seeking to raise $1 billion to back Project Libra.
“When I think about all the different ways that people interact privately, I think payments is one of the areas where we have an opportunity to make it a lot easier,” Zuckerberg said at Facebook’s F8 developer conference in late April. “I believe it should be as easy to send money to someone as it is to send a photo.”
But GlobalCoin may not be just about payments and money transfers. Facebook is looking seriously at commerce, too. At F8, it announced that its WhatsApp social messaging service will allow businesses to upload catalogs, the Facebook app is adding support for shipping services, and Instagram users will soon be able to buy products directly from influencers.
On the cryptocurrency front, Facebook has even opened talks with Zuckerberg’s arch-enemies, the Winklevoss twins, who famously sued him for stealing the idea for Facebook from them at Harvard. Facebook has held talks with their Gemini exchange, which is far ahead of the curve in terms of working with regulators, as well as the major exchange Coinbase.
A long road ahead
That said, even Facebook is in for a rough ride in creating a widely usable stablecoin. Regulation of cryptocurrencies is not much farther along in Europe, Asia, and much of the rest of the world than it is in the U.S., where the Securities and Exchange Commission (SEC) has not even issued solid guidelines defining when cryptocurrencies are and aren’t securities.
Previous attempts to create stablecoins have been unpromising. Citi killed its Citicoin in 2015 before it was even officially announced, and JPMorgan has made very clear that its new JPM Coin is only for institutional clients using enterprise blockchains. Meanwhile, the largest stablecoin, Tether, is in the midst of a scandal after loaning hundreds of millions of dollars from the U.S. dollar reserves backing its USDt to bail out sister company Bitfinex after it lost $850 million. And the high profile Basis stablecoin project shut down in December due to regulatory uncertainty in the U.S. and returned $133 million to powerhouse investors including Andreessen Horowitz and Google Ventures.
Facebook’s biggest advantage in successfully making GlobalCoin a standard method of transferring money and making purchases is its vast reach.
Aside from its own 2.4 billion users, Facebook has access to 1.5 billion WhatsApp users in 180 countries, including more than 200 million in India and 120 million in Brazil, according to Digital Information World. It is the No. 1 social messenger in 133 countries, including Canada, Mexico, Central and South America, and much of Europe, Africa, and the Middle East. Facebook Messenger has 1.3 billion users and is No. 1 in another 75, including the U.S, Australia, and most of the rest of Europe and Africa. Its only major hole is China, dominated by WeChat.
Nor is Facebook the only Tech giant pushing into the financial space. Amazon is said to be looking at offering consumer banking services, while Apple Pay and Google Wallet represent serious pushes into digital payments by the leading smartphone firms. In “Blockchain Babel” a Financial Times book-of-the-month released in April, BNP Paribas’ Igor Pejic argued that these tech giants have the scale and expertise to disrupt the financial system.