There is a growing focus on Facebook’s recent digital currency announcement. Known as GlobalCoin, many people expect this venture to disrupt the appeal of cryptocurrencies such as Bitcoin. As is always the case, there are still a lot of unknown factors which need to be addressed. Some interesting aspects of Facebook’s currency are known already, but it is always important to keep one’s expectations in check.
GlobalCoin isn’t a Cryptocurrency
Rest assured there will be many people who draw parallels between GlobalCoin and Bitcoin. While that is only to be expected, it is rather apparent Facebook’s venture cannot be a cryptocurrency by default. This is centrally owned and issued digital currency, which will not necessarily require a blockchain or any form of decentralization. In fact, decentralization has never been a selling point of what Facebook stands for.
As the name somewhat expects, the main selling point of this digital currency is to make it a payments system. In that regard, there are some similarities between GlobalCoin and Bitcoin, but that is where the similarities will end. It is commendable to see technology giants like Mark Zuckerberg venture into the world of digital payments, but making a lasting impact will always be a key challenge first and foremost.
Limited Availability Despite “Global” Name
While the name of this digital currency seems to indicate there will be a global appeal to this project, that will not necessarily be the case. It is expected Facebook’s currency will only be available in a dozen countries by Q1 2020. Not the most appealing start, primarily because no one knows exactly which countries will be included. A launch in either Asia or the US seems rather unlikely, primarily because of regulatory reasons.
The ongoing talks with the Bank of England seem to confirm this venture may focus on several European countries at first. That would make a fair bit of sense, primarily because the regulatory aspect is more lenient in that part of the world. Despite the appeal this project may have, it remains to be seen if GlobalCoin can gain any real traction. Disrupting the financial system in any way, shape, or form is always a bigger challenge than initially assumed.
Who Will Support This Currency?
While the logical assumption is to see GlobalCoin being used on Facebook,m that won’t make it a global digital currency by any means. Facebook is not used by the majority of people on this planet, thus the label of “global currency” already seems to be somewhat overstated. Although its 2.38 billion active users is a more than respectable figure, there are several regions where fewer people rely on Facebook as more time progresses.
Outside of the social network itself, finding willing partners to support this digital currency will be a key hurdle to overcome. It seems Facebook is in talks with Western Union, albeit it remains to be seen how the company will handle this situation. After all, Western Union isn’t necessarily inclined to support a currency which would rival its core business. It could be a useful currency to streamline global payment corridors, depending on how this entire system will work.
The new Swiss Association
Perhaps one of the more interesting topics of debate is why this venture requires its separate association. Facebook is in the process of joining forces with banks and brokers, thus creating a legal entity of sorts seemingly makes a lot of sense. By opting to register the association in Switzerland, a very interesting tone is set. Switzerland is very friendly to financial innovation, thus this new digital currency may benefit from local regulatory and legislative measures. Setting up an association will not improve this venture’s chance of success, however.
Privacy Concerns Shouldn’t be Ignored
To date, Facebook has made a lot of headlines in terms of violating user privacy. Numerous incidents have occurred regarding how the company handles user information and decides to commercialize it. If a digital currency payment network is created, the company can begin collection financial data on its users as well. Not something to look forward to among users who value their privacy. Considering how Zuckerberg claimed he wanted Facebook to be more privacy-centric and responsible, it seems the GlobalCoin venture could very well trigger the opposite effect.
The Second Payments Venture
While some people will claim Facebook is innovative, it is not the company’s first financial venture. Several years ago, Zuckerberg’s firm tried to launch Facebook Credits as a virtual currency. It would allow users to purchase items on the social networking platform, albeit it never amounted to much. Most people have even forgotten that system ever existed, primarily because it was only available in a handful of countries.
Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency or digital currency.
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