Why Facebook is developing a cryptocurrency for WhatsApp users
- Facebook is reportedly developing a stablecoin for WhatsApp users in India.
- A stablecoin is a class of cryptocurrency that's pegged to a stable asset like fiat currency or gold.
- India currently has more than 200 million WhatsApp users, and it sees more than $60 billion in global remittances every year.
Facebook is reportedly developing a cryptocurrency that would facilitate financial transactions on its WhatsApp messaging service, according to a new report from Bloomberg.
The social media platform has long eyed a move into blockchain. Facebook CEO Mark Zuckerberg wrote in his New Year goals for 2017 that he planned to study encryption and blockchain to “see how best to use them in our services.” In May, Facebook appointed David Marcus, the former president of PayPal, to head the company’s blockchain initiatives division, which currently employees about 40 people.
“Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology,” a company spokesman said in a statement. “This new small team is exploring many different applications. We don’t have anything further to share.”
The company will reportedly first focus on India’s massive remittances market, estimated to be worth more than $60 billion. In early 2018, WhatsApp rolled out a beta version of its Payments system that enabled users in India to make peer-to-peer transactions, however the government put that program on hold, partly due to regulatory concerns stemming from Facebook’s Cambridge Analytica scandal.
It’s possible that WhatsApp could expand its Payments service to include the ability for users to make transactions with businesses, which might pay the company a fee to reach consumers.
The main benefit of stablecoins is—you guessed it—stability. Unlike cryptocurrencies such as Bitcoin and Ethereum, whose values can fluctuate by more than 10 percent in a single day, the value of stablecoins is unlikely to see wild swings, making it a much more practical choice for use in daily transactions.
Currently, the biggest stablecoin cryptocurrency is Tether, which has a market cap of about $2 billion. Tether is pegged to the U.S. dollar and it’s designed to always have a value of $1, though it’s swung to $.80 and $1.10 in the past.
Despite its popularity and seemingly sound technology, critics have suspected that the project’s founders don’t actually have the cash to back up its supposedly dollar-backed cryptocurrency. A recent Bloomberg report suggested Tether actually does have the cash.
In any case, a stablecoin makes it easier for WhatsApp users around the world to send remittances to India, where more than 200 million people already use the messaging app. What remains unclear is whether those users will be willing to use a cryptocurrency financial service under the umbrella of Facebook, which continues to be hit by privacy-related scandals.