Crypto Killer or Bitcoin Savior? Six Predictions on Facebook’s Secret Cryptocurrency
Co-founder of the Wyoming Blockchain Coalition, Caitlin Long, a 22-year Wall Street veteran who has been active in Bitcoin since 2012, has made six predictions about Facebook and the impact of its upcoming cryptocurrency: GlobalCoin. The new stablecoin is designed to facilitate global payments and transfers, allowing people to send money across borders, just like email.
According to a report by WirtschaftsWoche, Laura McCracken, Facebook’s head of financial services and payment partnerships for Northern Europe, says GlobalCoin will be tied to a basket of fiat currencies, eliminating the volatility of leading cryptocurrencies such as Bitcoin which are subject to wild price swings and market sentiment.
Facebook’s blockchain project, dubbed “Libra”, has been under wraps for several months with a recent report suggesting that the social network will announce the new cryptocurrency later this month. A whitepaper is expected to drop on June 18.
Its imminent launch has been polarizing, with crypto analysts debating how Facebook’s entry into the cryptosphere will rock the space. Standing on one side of the crypto aisle are influencers who expect GlobalCoin to legitimize and benefit the space, while others are prepared for GlobalCoin to go head-to-head with leading cryptocurrencies, annihilating the competition.
“Grab the popcorn because I analyzed publicly disclosed info to make 6 predictions, of which 2 will be controversial (#2 and #6).
First prediction: Facebook’s stablecoin will be a positive force in developing countries. Second: Facebook will pay interest to users of its cryptocurrency, which will eventually lead to populist calls to repeal subsidies at the heart of the US banking system.
It’s true that stablecoin issuers generally pocket the float on the assets backing the coins, but I go out on a limb and predict there’s no way Facebook will be able to pocket these big profits without sharing them with users. To be clear I haven’t seen Facebook disclose this.
The Facebook foundation will garner big power in capital markets. I discuss the report that FB is charging $10 million to node operators, which at first struck me as backwards. But there’s a big pot of interest income for its partners to share, if it doesn’t pay interest to users.
That said, an independent foundation is a big positive for the project. Fourth, Facebook’s cryptocurrency project will face all kinds of regulatory uncertainty. (I happen to know of an ideal regulatory structure for it.)
Fifth, Facebook’s regulatory reporting program will open new discussions. Not only will we see how many of Facebook’s 2.3 billion users are real (cryptocurrency users must pass identity verification), but discussions about FB’s privacy and power are about to extend to money.
This project will create a huge data honeypot for governments globally – with all the privacy and tax reporting implications such a data honeypot entails. It will enable government officials who want to track every dollar spent. I’ve long maintained financial tx reporting rqmts won’t pass a US constitutional challenge. How interesting if Facebook were at the center of such a challenge. Would it fight or fold??
Sixth, Facebook’s foray into cryptocurrency will likely end up a beneficial detour on the path to broader bitcoin adoption. By educating consumers about the benefits of crypto and improving the user experience, FB will pull more users into BTC whether it intends to or not.”
Long points out that Venezuela’s adoption of Bitcoin was preceded by educational efforts about the ill-fated petro digital asset. Although the government-backed project failed to become a currency, it served to expose people to cryptocurrencies as an asset class and created a spike in Bitcoin use and trading volume on LocalBitcoins, a peer-to-peer exchange.
“Once people figure out cryptocurrencies and UX is easier, they’ll do the same: migrate to the most honest ledger for storing their hard-earned wealth. That’s not fiat currencies or derivatives thereof, including Facebook’s stablecoin. So, this is a beneficial detour – bring it on!”
While Long highlights the possible benefits of GlobalCoin, talk show host Max Keiser and Bitcoin Foundation founding member Charlie Shrem are calling it the end of Ripple and similar altcoins, given Facebook’s ability to leverage its existing website, WhatsApp and Messenger, effectively moving to the head of the line by circumventing the time needed to attract new members to a brand new blockchain-based network.