Facebook is reportedly working on its cryptocurrency which it plans to roll out by 2020 when the company is slated to launch its digital payments system in a dozen countries. The social media company wants to begin with its testing of the cryptocurrency, which is being termed internally as ‘GlobalCoin’, by the end of this year, the BBC reported.
The social media giant is expected to provide more details on the cryptocurrency later this summer and has spoken to the Bank of England governor Mark Carney. Facebook’s founder Mark Zuckerberg met Carney last month to discuss the risks and opportunities involved in the said cryptocurrency.
Facebook has also been in talks with the US Treasury, as well as money transfer firms such as Western Union, to discuss operational and regulatory framework related to the cryptocurrency, the report said.
The reports of Facebook developing its own virtual currency for WhatsApp emerged in December last year when it was nicknamed as Project Libra. The company has long been expected to move into the financial services industry after hiring former PayPal president David Marcus in 2014. Last year in May, Marcus became the head of Facebook’s blockchain division.
What is a cryptocurrency?
A cryptocurrency is a virtual currency which can be used for payments. In this, digital coins are held through online wallets which can be sent anonymously to other users having similar wallets. The virtual currencies run on blockchain technology, that is stored across a network of computers.
The information can be viewed by a community of users and is not governed by any central bank or government. The concept was designed to ensure security and anonymity for users.
What are the concerns?
In recent years, Facebook has been in the news for wrong reasons particularly over its handling of personal data of the users and according to reports, regulators are likely to examine the launch of Facebook’s cryptocurrency very closely, the BBC report said.
US Senator and Chair of the Senate Banking Committee Mike Crapo had earlier this month written an open letter to Zuckerberg questioning about the working of the cryptocurrency, Facebook’s consumer protection on it and security of the data.
To prevent sharp swings in Facebook cryptocurrency’s value, it is believed that the company will be tying it to a basket of major currencies including the US dollar, euro and Japanese yen.
What are the challenges?
Despite all this, Facebook may have an uphill task ahead in India, which is arguably one of its largest markets. Here, the Reserve Bank of India (RBI) has prohibited all its affiliated banks and non-banking financial companies (NBFCs) from directly dealing or providing services to any person or entity for facilitating trade of any virtual currencies, according to a circular dated April 6, 2018.
In a circular issued last month, RBI came up with a proposal to start a regulatory sandbox for India’s fintech firms. A regulatory sandbox is an important tool, which will enable more dynamic, evidence-based regulatory environments that learn from and evolve with emerging technologies. However, cryptocurrencies have been excluded from this proposal.