Cryptocurrency has struggled to gain mainstream traction, but the promise of digital coins has attracted the interest of one of tech’s biggest companies. Facebook has explored blockchain-centric projects in the past few years, but a new payment initiative the Wall Street Journal reports is “code-named Project Libra” prominently features digital currency – and has the potential to succeed where other projects have failed.
Facebook has been “recruiting dozens of financial firms and online merchants to help launch” the platform, which sources said would center around a new digital coin that Facebook users could use to “send to each other and…make purchases both on Facebook and across the internet” through theoretical partnerships with internet retailers and apps. The coin would be backed by almost $1 billion, which Facebook has looked to raise from traditional payment figureheads like Visa and Mastercard, who would also help handle “logistics and regulatory burdens.”
The investment “would underpin the value of the coin to protect it from the wild price swings” that have plagued traditional cryptocurrency – creating, in effect, a stablecoin. Mitigating extreme price fluctuation would go a long way to aiding mainstream adoption for cryptocurrencies, but obstacles remain – there has long been a dearth of use cases for crypto in payments, and an “existing system…full of entrenched interests and technology clogs,” plus intense scrutiny on Facebook for a variety of privacy concerns and data misuse, are concerns.
One benefit of a Facebook coin would be the ability to leverage the social media giant’s massive user base, which currently stands at about one-third of the world’s population – including 1.5 billion daily users, many of whom in “developing countries where social-media sites provide the backbone of internet commerce.” To spur adoption, sources indicate that Facebook could create a loyalty point-esque system, “paying users fractions of a coin when they view ads, interact with other content or shop on its platform.” A loyal component and use potential as a payment option across e-commerce, ala PayPal, would give the coin unprecedented traction.
The coin must navigate additional obstacles, including pleasing the payment giants (and stakeholders) whose dominance would be threatened by its success. Sources indicate that the value adds for merchants would be “a break on [swipe and other card processing] fees” of roughly two to three percent that are typical to card transactions; retailers could also “recycle” proceeds from ad-based purchases to buy additional ads.
While there is no confirmed release date, a Facebook coin could prove tremendously valuable for the company, consumers, and retailers alike. Time will tell if it can succeed where others have failed, but there is no doubt that its rollout will be closely watched – and copied if it thrives.