Facebook is finalizing the project to launch its first cryptocurrency, the GlobalCoin, in the first two months of 2020. The expectations are that the company starts to test it later this year. The currency will work as one of the pillars of a digital payment system that would work in a dozen countries. The UOL published an analysis developed by the BBC on the matter.
How will Facebook cryptocurrency work?
Currently, Facebook brings together more than 2 billion profiles around the world. The company’s goal is that the payment system with digital currency works for users who also do not have a bank account.
With this, the company seeks to break down barriers, to compete with banks and reduce consumers’ costs. The project, nicknamed as Libra, was reported for the first time in December last year.
Facebook would also be negotiating with online traders to accept the currency as payment in exchange for lower transaction fees.
Why the cryptocurrency of Facebook raises concerns?
A few years ago, Facebook has been criticized for the way it manages and preserves the personal information of its users. So, the cryptocurrencies project of the company has been observed carefully by regulators.
Recently, the US Senate wrote an open letter to the owner and founder of the company, Mark Zuckerberg, asking questions about the operation of the currency and what sort of protection will be granted to the consumers. Another concern is regarding the protection of information.
Facebook had also discussed, along with the US Treasury, about the identity checking process (KYC). In addition, it´s under evaluation how it will be possible to reduce the risks of money laundering.
The estimate is that the company and its partners will want to prevent large currency fluctuations. So the idea would be to tie the cryptocurrency to traditional fiat money, as the US dollar, the euro and the Japanese yen. In other words, Facebook crypto will be a stablecoin.
Second attempt
This isn’t the first time Facebook tries to ride out the crashing wave of digital currencies. A decade ago, the company created the Facebook Credits, centralized virtual currency, which allowed users to buy items in applications on the social network. However, the project was not successful and was discontinued two years ago.
In the new venture, the company will have to browse a number of regulations in the countries where it intends to perform. One of them is India, which recently banned digital currencies.
What it´s known so far is that the discussions are in the early stages with Governments, central banks and regulators. Thus, people who follow the process admit that launching any cryptocurrency until the beginning of next year is an ambitious goal.
Possible barriers
The biggest attraction of the digital currencies to banks and large companies is the technology behind them. The blockchain technology can help reducing the time and cost of sending money across borders crossing banks networks. The expert David Gerard said that Facebook would have access to valuable information about expenses by creating its own payment system.
However, he questioned why the giant social network would need its own cryptocurrency to save the data. According to Gerard, Facebook could create a platform such as PayPal, which allows users to transfer traditional forms of payment.
According to Gerard, the cryptocurrencies are vulnerable to fluctuations in value, which might create a barrier to the success of Facebook GlobalCoin. “Ordinary people don’t want to deal with a currency that is constantly going up and down,” he explained.
However, Garrick Hileman, a researcher at the London School of Economics, said that the project can be one of the most significant events in the short history of the cryptocurrencies. He makes a conservative estimate: 30 million people are using cryptocurrencies nowadays.
