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Facebook to Launch New Cryptocurrency as It Ventures Into Financial Services

The world’s largest social media company will leap into the cryptocurrency market as early as this year.

(Image Credit: Steven Millstein via Flickr)
(Image Credit: Steven Millstein via Flickr)

Social networking giant Facebook is expected to announce next week that it is planning to launch a new cryptocurrency as early as the end of this year, according to a report published by San Francisco-based news website TechCrunch. The details of the venture into blockchain by the California-based firm will likely be revealed in a white paper on June 18, according to a statement made by Facebook executive Laura McCracken to a German magazine last week.

Rumors about Facebook launching their own cryptocurrency have been doing the rounds since the American company was revealed as a major stakeholder in newly-registered financial services firm named Libra Networks in Switzerland. Conflicting reports about the name of the new cryptocurrency have emerged in the past few weeks, with Libra and GlobalCoin being the two most cited references. A 2020 launch date for the cryptocurrency is already being reported by TechCrunch, quoting sources from within the California-based company.

How Will the New Currency Work?

Facebook wants to make it affordable and safe for people to make payments. If successful, the company can bring a whole host of the world population that does not use banks into the digital fold, contends a commentary on the issue published by the Royal United Services Institute (RUSI) think tank. The new currency will enable Facebook users—more than two billion across the globe—to make transactions across different platforms owned by the company, such as Instagram and WhatsApp.

The social networking firm will likely join hands with different banks and money exchanges to make it easier for people to change their currencies into digital coins offered by Facebook, reports the BBC. These coins could be rolled out first to allow users to pay for promoting content on different Facebook platforms, and eventually expand. Facebook coins might be available through ATMs as well, suggest reports.

In an effort to encourage the widespread adoption of the currency, Facebook could offer sign-up bonuses, high mining rewards, and zero fees on money transfers across international borders, speculates TechCrunch. To address concerns about data privacy, Facebook could set up an independent foundation to oversee the cryptocurrency.

Facebook Intends To Guard New Currency From Price Fluctuations

Keila Izenman, a research analyst with RUSI, predicts that the Facebook cryptocurrency will be in the category of stablecoins, a type of blockchain whose value is based on traditional assets to circumvent the wild fluctuations seen in the set up of other digital currencies. While the BBC reports that the stablecoin will be based on the U.S. Dollar and the British Pound, TechCrunch claims that the latest crypto will be tied to a broader basket of international currencies.

Facebook has already held talks with both the Bank of England and the U.S. Treasury, as well as Western Union, in preliminary negotiations on the matter. McCracken has separately confirmed to a German magazine that the digital endeavor will be tied to multiple currencies to keep prices in check.

Facebook could soon face competition in the cryptocurrency market from Telegram. The Independent reports that Telegram will launch its “GRAM” cryptocurrency later this year.

The announcement of a new currency from Facebook comes at a time when many cryptocurrencies are poised for fresh gains after a rough few months. Based on its own technical analysis of the blockchain market, strategy and consultancy firm Fundstrat has advised investors to buy digital currencies as it believes the momentum shifts in their favor again. The entry of Facebook is also likely to put pressure on existing currencies to stabilize their internal mechanisms or risk going out of relevance.

Usman Kabir covers science, space, and technology for Globely News. As a kid, he would make models of the solar system and take part in water rocket competitions. His childhood obsession has led him to a degree in Space Science. Usman likes to spend his free time watching reruns of "Curb Your Enthusiasm" and "Seinfeld."

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