According to The Guardian newspaper (UK): “Facebook is planning to launch its own cryptocurrency in early 2020, allowing users to make digital payments in a dozen countries.”
“Payments is one of the areas where we have an opportunity to make it a lot easier,” Zuckerberg told the company’s developer conference last month. “I believe it should be as easy to send money to someone as it is to send a photo.”
In order to try to stabilize the digital currency, the company is planning to peg its value to a basket of established currencies, including the US dollar.
According to the Financial Times, Facebook wants to launch its own currency to follow in the footsteps of so-called “super apps” such as China’s WeChat, that allows users to send money, shop, order taxis and play games without ever having to leave the one platform. …
An earlier report by the Wall Street Journal, reported that Facebook may encourage transactions by rewarding its users with the currency if they view ads on the platform, in a similar way to the collection of loyalty points. Experts expect this type of network to encourage Facebook’s vast user base to spend more time and money on the platform. It could address user concerns over Facebook’s advertising business model — but might also allow the company to collect more data on users, such as spending patterns.
The Dramatic Rise in Digital Currencies
According to Cryptoslate.com, “Cryptocurrencies have grown from a tiny niche to an industry with a $250 billion market capitalization in less than a decade, but their immense growth seems to have been tough to follow. Financial regulators across the globe have been struggling with how to police an industry, and assets, that are difficult to track. Countries such as China, Taiwan, and Russia have all banned cryptocurrency transactions and have gone out of their way to control the industry.”
Forbes wrote these details about what investors need to know regarding cryptocurrencies:
“While Bitcoin (BTC) and Ethereum (ETC) are the cryptocurrencies currently holding the first and second largest market cap respectively (BTC $105.3B, ETC $18.8B), there are more than 2,500 other cryptocurrencies according to this list at Investing.com. The opportunities abound, but just how valid are they?”
TheNextWeb.com wrote a very helpful piece about the differences between cryptocurrencies, virtual currencies and digital currencies:
“Digital currency is the blanket term used to describe all electronic money, that includes both virtual currency and cryptocurrency. It can be regulated or unregulated.
It’s only available in digital or electronic form and unlike a dollar bill or a coin, it’s intangible. Digital currencies, which can only be owned and spent using electronic wallets or designated connected networks, are also commonly called digital money, or cyber cash.
The lack of intermediaries means transactions are typically instantaneous and incur no or little fees.”
Virtual currencies are a type of digital currency, typically controlled by its creators and used and accepted among the members of a specific virtual community
Here is where it gets a little confusing: all virtual currencies are digital (they exist online only), but not all digital currencies are virtual, because they exist outside a specific virtual environment.
Cryptocurrencies such as Bitcoin and Ethereum are considered to be virtual currencies.”
More 2019 Predictions Coming True
Back at the beginning of the year, I wrote a blog quoting several experts who predicted a coming surge in cryptocurrencies, which will replace many loyalty programs. Here’s an excerpt from that piece:
The IMF is saying that even governments could set up their own cryptocurrencies in order to prevent the systems from becoming havens for fraudsters. “A system regulated by central banks could become the basis for a rapid expansion of financial services to developing world countries and the poorest people in western societies without the risks associated with privately managed digital currencies.
The IMF’s proposal is likely to be greeted warily by many digital currency operators who believe one of the main attractions of their technology is that it lies outside the mainstream banking system. The involvement of a central bank could also be seen as imposing heavy-handed regulation that would slow down transactions and raise costs. …”
So what’s next with this trend? Airlines, such as AirAsia’s BigCoin, are getting set to roll out their own cryptocurrencies. “'The airline will turn its frequent flyer points into BigCoin,' [AirAsia founder and chief executive Tony] Fernandes said, 'before revealing that ticket prices on the airline’s website will be revealed in BigCoin alongside prices in fiat currencies from this month onwards.'”
To understand where this is heading, think more broadly about your loyalty program points, such as your miles with airlines, restaurants, gas stations, hotels, or other businesses. Most of these can be converted into new cryptocurrencies — and the trend will take off in 2019 and beyond. How about university cash programs and even cities issuing bonds in their own cryptocurrencies?
There are many benefits to following AirAsia’s model of building a blockchain loyalty program, and the winners will be both consumers and the organizations trying to build loyalty. “Instead of trying to convert everyday customers to become involved in cryptocurrency and its many newcomer pitfalls, an app-based loyalty system can get people using cryptocurrency without even realizing it:
- Allow the loyalty app to function as a multi-feature crypto wallet.
- Incentivize the initial accumulation by rewarding loyalty points for everyday actions to introduce newcomers to the system.
- Give people abundant options to accrue and spend these loyalty points.”
“By switching to a tokenized system, a college student who cares about poverty in the city can buy $20 worth, knowing his contribution is going toward, say, an affordable housing project. He can then use his tokens on other city goods, like transit rides or groceries, or he can hold on to them as an investment. …”
UTRUST Global Partnerships Vice President Sanja Kon predicts an increase in cryptocurrency transactions in 2019: “Crypto payments until now have mostly been a niche phenomenon, with Bitcoin being the primarily used cryptocurrency. In 2019, we will witness a rise in multiple cryptocurrency payments, as more and more customers are getting interested in the advantages crypto payments bring, among which the lower transaction cost and decentralization.”
Serious Questions Remain About Facebook’s Cryptocurrency Plans
Not everyone thinks Facebook’s plans will be good for global consumers. Newsbtc.com wrote:
“Frank Chaparro of The Block reminds his followers that Zuckerberg hasn’t had much of a regard for the privacy of his users, even when Facebook was a fledgling firm. Others echoed this sentiment, noting that the product is not only going to likely be centralized and will be susceptible to censorship, government oversight, amongst other concerns that don’t pertain to Bitcoin.”
And the U.S. Senate’s Banking Committee wrote this letter with questions for Facebook about their plans. Here are a few examples:
- How would the new cryptocurrency-based payment system work, and what outreach has there been to financial regulators to ensure it meets all legal and regulatory requirements?
- What privacy and consumer protections would users have under the new payment system?
- Does Facebook have any information bearing on an individual’s (or a group of individuals’) creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living that is used (by Facebook or an unaffiliated third party) to establish eligibility for, or marketing of a product or service related to, (1) credit, (2) insurance, (3) employment, or (4) housing?
Final Thoughts
It's not the first time Facebook has dabbled in digital currencies. More than a decade ago, it created Facebook Credits, a virtual currency that enabled people to purchase items in apps on the social networking site. However, Facebook ended the project after less than two years.
There is no doubt that this new cryptocurrency will have a huge global impact when Facebook launches in 2020, but what is perhaps more important is the trend for numerous worldwide organizations to launch their own cryptocurrencies.
This ZDNet article from last summer proclaimed that the bubble for cryptocurrencies is over — here comes the boom. The troubles is that bitcoin's value crashed last fall after this piece was published, before the price came back more recently.
Regardless what happens with bitcoin, the amazing growth trends described in the ZDNet article about Initial Coin Offerings (ICOs) cannot be denied. Just as cybersecurity topics have taken off over the past decade, this cryptocurrency topic is set to move from a fringe of technology and finance topic and into our mainstream vocabulary over the next decade — even for state and local governments.
What lies ahead in the near future for ICOs remains somewhat mysterious. Still, I have no doubt that we will be returning to this important cryptocurrency topic, along with associated cybersecurity sub-topics like cryptojacking malware, in 2020 and beyond.
