Facebook's Cryptocoin: Where Do We Sign Up?
One thing to say for Facebook Inc. (NASDAQ: FB): the company thinks inside the box. It’s own box.
With a fine of up to $5 billion looming and regulators around the world looking for ways to rein in the company’s somewhat lackadaisical attitude toward its users’ privacy, Facebook is considering issuing a digital coin that its users could employ to make purchases on the social media site and across the internet generally.
According to a report late Thursday in The Wall Street Journal, the company is working to line up financial firms and online merchants to back its digital Facebook coin, a so-called stablecoin backed by the U.S. dollar and running on blockchain technology. JPMorgan announced its own stablecoin in February.
The Wall Street Journal’s sources said that the Facebook cryptocurrency would work much like the company’s user profile that can be used to login to hundreds of websites. A user’s Facebook crypto-account details could be added to that profile and the account could be used to make online purchases. A user’s account could even be credited with a (minuscule) fraction of a Facebook coin every time the user views an ad or does something else that Facebook can use to keep its ad rates up.
And selling user data for advertising purposes is what Facebook is all about. The Wall Street Journal notes that the company is considering letting retailers use the coins it receives from customers to pay for more advertising on the Facebook site. A similar feature using traditional card payments was rolled out on Facebook-owned Instagram in March.
One of Facebook’s goals since its founding has been to tangle itself up in its users’ lives to such a degree that Facebook becomes, in a real sense, an intermediary between who you are and who you interact with and, now, where you spend your money. Given the company’s track record of protecting its users’ private information, it would seem that being able to guarantee that your Facebook coin account is both safe and stable (i.e., one Facebook coin is always equal to one U.S. dollar) ought to be based on something other than the company’s promise that everything will be fine, just trust us.
Facebook itself has had virtually nothing to say about the rumors that it is working on a Facebook cryptocurrency. The newpaper’s sources say that the company is trying to raise $1 billion from card issuers Visa and Mastercard, along with payment processor First Data, to provide the one-to-one backing for the Facebook coin. Facebook is sitting on a $34 billion pile of cash and short-term investments, while Mastercard, Visa and First Data have a combined hoard of less than $20 billion. Why doesn’t Facebook just back its own cryptocoin?
Does Facebook entertain visions of a crypto-future where the Facebook coin replaces the U.S. dollar as the world’s reserve currency? Some company, someday, is going to get there first, so get on board or lose out. This is the opportunity of the century.
One thing that Facebook knows in its very DNA is that being first matters. Do whatever it takes to win and then apologize later if necessary. That’s how Facebook has been run since the beginning, and so far nothing has happened that would cause it to seek a DNA transplant. Maybe a $50 billion fine would have some effect, but a paltry $5 billion almost certainly won’t. Those Facebook coins are going to be great.