Facebook Could Debut Its Fiat-Backed Cryptocurrency This Month

Facebook’s much-hyped cryptocurrency project is expected to be launched later this month, according to a report.

Citing a report by The Information, CNBC said that the social media giant will have a bonus for merchants who adopt the currency. It will also have real-world kiosks where the cryptocurrency can be exchanged for real money, which makes it more appealing than the likes of Bitcoin which does not have such a feature

Facebook had appointed former PayPal executive David Marcus about a year ago to begin exploring use-cases of blockchain, which makes the base of the new cryptocurrency, and reports say that the employees working on this project will have the option to get paid in the new currency.

Backing Up The Currency

In a bid to make the digital coin more trustworthy, Facebook’s new cryptocurrency will be far more centralised than Blockchain, with 100 or fewer nodes in its payment framework, against other cryptocurrencies where nodes are distributed across several users. This is likely to make it more stable with fewer nodes to manage over the chain.

A more centralised approach to the new cryptocurrency means that Facebook can have its resources set up in fewer locations, rather than have them distributed across geographies and markets. According to the report, Facebook is looking at partners for the cypto project, who are likely to be charged a licensing fee ($10 Mn per partner) to help back the cryptocurrency with fiat currency to keep it stable.
Facebook is also looking to create a foundation to manage the currency which will also have a representative from each node operator.

Battling Scepticism

Facebook’s ad model has been under criticism of late due to concerns of privacy being sidelined in favour of the bottomline. Building a cryptocurrency system to facilitate transactions between potentially 2 Bn users would help the company diversify its revenue roadmap beyond advertising.

The new cryptocurrency is designed to function as a borderless currency without any transaction fees. It will also aggressively be marketed in developing nations where government-backed currencies are volatile.

Facebook also has the unenviable task of dealing with regulators who have been sceptical about cryptocurrencies at large.

Facebook CEO Mark Zuckerberg sees payments as an essential segment for the company and had openly advocated about it at Facebook’s F8 conference earlier this year. However Facebook COO Sheryl Sandberg and CFO David Wehner are skeptical about the initiative according to reports.

Facebook has already been tainted with scandals around data privacy — the Cambridge Analytica fiasco had put the data of 5.62 Lakh Indians at risk. India’s data protection norms, since then, have barred international internet and data services from storing data of Indian users outside India. This has made things challenging for Facebook’s existing payments platform WhatsApp Payments.

Even though WhatsApp Payments was launched in India last year in beta phase, it’s yet to receive clearance from the Indian government to become fully operational. India has raised concerns about the storage of data outside the territory, as well as Facebook’s data sharing infrastructure with WhatsApp and Instagram. The government had recommended that WhatsApp set up an Indian office, and hire a grievance officer based in India, before it can get launch approval.