Facebook’s cryptocurrency ambitions could translate into reality as soon as next year. The BBC reports that the social media behemoth is on track to start testing its bitcoin rival – known internally as GlobalCoin – by the end of the year before its digital payments system comes online across 12 countries in the first quarter of 2020.
Facebook is attempting to disrupt bitcoin
It emerged last month that Facebook was looking for $1 billion in funding for Project Libra, its secretive cryptocurrency project.
Libra took off a year ago when Facebook was looking to devise a way to transfer money between users of its WhatsApp service. But the social media giant’s ambitions have grown far bigger. It is now looking to create a digital payments system that will ensure cheap, fast, and secure money transfer between users.
In simple words, Facebook is trying to copy what bitcoin already does – reduce transaction costs and remove barriers in the financial system to cut transaction times.
CEO Mark Zuckerberg probably believes that he can disrupt bitcoin in particular and the cryptocurrency industry in general thanks to a massive user base, driven by properties such as WhatsApp and Instagram.
The Facebook CEO had said earlier this year that he is planning to integrate Messenger, WhatsApp, and Instagram to enable cross-platform messaging. In hindsight, it looks like Facebook was already preparing for the launch of the so-called GlobalCoin, as the cross-platform messaging feature would allow users across all three services to send digital currency to each other.
A shady approach
What’s more, Facebook has reportedly been talking to regulators in the US and the UK in preparation for the launch of GlobalCoin. The company has spoken to Bank of England governor Mark Carney, as well as US Treasury officials to gain insights about risks, opportunities, operational, and regulatory issues regarding GlobalCoin, according to the BBC.
This gives us a clear indication that Facebook is trying to get the establishment on its side before coming out with a bitcoin rival to ensure that Zuckerberg’s foray into cryptocurrency succeeds. But this shady approach of Zuckerberg defeats the purpose of cryptocurrencies such as bitcoin.
Unlike bitcoin, Facebook’s GlobalCoin will be under the control of the social media company. The biggest advantage of bitcoin is that it is a decentralized digital currency that isn’t controlled by anyone. There is no central authority bitcoin holders report to, but that will probably not be the case with GlobalCoin as Facebook will have access to the identities of all those who hold its digital currency.
So GlobalCoin will throw anonymity out of the window.
The next big problem is that Facebook has been known to mishandle users’ data. The Cambridge Analytica scandal and the latest breach where the personal data of more than 49 million Instagram accounts were compromised are big red flags for anyone looking to trust Facebook’s GlobalCoin.
For a company that’s adept at handing over the keys to critical user data to third parties – even if inadvertently – users of GlobalCoin could be staring at massive losses if it is compromised.
What’s more, don’t be surprised to see Facebook freezing you out of your cryptocurrency account at their will. The company has been known to ban users it deems dangerous, and you can expect Facebook to follow a similar policy with its crypto wallets.
In the end, Facebook’s efforts to create a bitcoin rival could fall flat on its face because it is on track to defeat the purpose of a decentralized digital currency. Zuckerberg might be trying to pull a lot of strings to get GlobalCoin off the ground, but bitcoin has several advantages that could ensure the death of GlobalCoin on its arrival.