Facebook Announces Development of Centralized Cryptocurrency

By Daniel Zo Facebook, Cryptocurrency

During the last couple of years, the cryptocurrency market has grown exponentially. Yet, this increase in popularity brought along several new fintech trends, including the emergence of central bank digital currencies (CBDCs), tokens, and now, social media cryptocurrencies.

Recent reports indicate that Facebook has been actively working on its cryptocurrency ambitions for a while. Rumours discussing an internal crypto-related project have first appeared last year, when it was revealed that Facebook was seeking a $1 billion funding for Project Libra, the social network’s digital currency.

Facebook logo

At first, Facebook announced that the main purpose of Project Libra would be to facilitate easy monetary transfers between users of the WhatsApp instant messaging platform. Now, it seems like the company is ready to scale its project, and transform it into an actual value-based digital currency, usable by both Facebook’s users, and anyone else who is interested. Known internally as GlobalCoin, the cryptocurrency will reportedly be integrated within Messenger, Instagram and Facebook, thus allowing money to be sent from any of the three platforms.

Rumours also indicate that Facebook has been holding meetings with regulators in the United States and the United Kingdom, to gain more insight about future regulations and compliance challenges. Therefore, it seems like Mark Zuckerberg’s company is taking a slow approach, meant to mitigate all potential risks, and ensure the launch of quality, and inclusive coin. Speaking of the launch, it is believed that 2020 will be year when Facebook launches the coin in several countries.

Despite these aspects, there’s a significant difference between most cryptocurrencies, and Facebook’s GlobalCoin. Digital currencies like Bitcoin and Ethereum are decentralized, meaning that nobody holds direct control over their value, distribution, issuance, security, and privacy. They work as they’re meant to, thanks to a large network of miners and node operators. On the other hand, it is believed that Facebook’s coin will lack decentralization, thus raising questions over its security, anonymity, and market value.

However, it is easy to understand why Facebook believes their coin could potentially disrupt the market. To put things better into perspective, across all its platforms, Facebook boasts over 1.5 billion users, thus making it extremely easy for them to advertise their coin, and thus increase adoption. This isn’t the case with our mainstream decentralized digital currencies, which rely on exponentially different methods of promotion.

It is, however, important to point out that the bitcoin price failed to react to Facebook’s announcement. Only time will tell whether centralized digital currencies will end up accumulating a larger user base.