Facebook has been in hot waters throughout the year… mostly due its own doing. The data breach scandal which affected 87 million users, cost the social media giant dearly with the loss in consumers’ faith in the platform to protect their personal data. Its stock has lost more than 40% of its market value from the peak reached earlier in August with the move exacerbated by the downturn in markets of late. CEO Mark Zuckerburg had already shown his intention of exploring DLT in his New year goals of 2017 saying “see how best to use them in our services.” The earlier ban of FB & other big techs on advertising of shady ICOs has been tweaked to allow the advertisement of pre-approved Crypto projects, which are based on an application for an eligibility assessment. More importantly has been the recent news of FB’s plan to issue a stable coin for its flagship WhatsApp payment project in India, provided by the popular messaging platform.
Let’s take a look at the backdrop of this announcement to understand the motive behind this move besides the obvious one of diversifying into the Crypto market. Back in February, WhatsApp payments feature was introduced in the Indian market by the parent company Facebook to tap into the biggest remittance receiving country in the World with over 200 million WhatsApp users currently (of the 1.5 billion worldwide). Overseas Indians sent almost $70 billion back home in 2017 alone according to World Bank’s annual report (above). The new feature introduced includes a peer-to-peer UPI (Unified Payments Interface) whereby the users have to link their bank account details to their WhatsApp account & generate a UPI PIN which can then be used to send and/or receive money. You need to know either the UPI PIN or the phone number of the other person to complete the transaction. The funds get transferred directly to the bank. You can set up the payments feature by going to ‘Settings’ and then click on ‘Payments’ in WhatsApp. The payment option is available in individual chat screens as well as to specific users in a chat group. The remittance feature is, however, not good for making payments to e-commerce sites like Amazon & Flipkart etc.
According to a recent report by Bloomberg, Facebook has been actively pursuing the blockchain space for the past few months, with the news of fiat-backed Crypto being recent in a string of initiatives taken to explore & eventually harness the DLT. Stable coins have been the latest buzz word for the Cryptoverse with a bunch of them launched this year alone, but most of them haven’t made the cut. Tether (USDT) has by far been the most popular one with the major chunk of the market cap under its belt, but USDT has been mired in one controversy after the other mainly due to its refusal to have an independent audit done. For those of you don’t know too much about stable coins, the following infographic should provide a good basic refresher.
While Stable coins come with their own advantages of a stable peg to a fiat currency, added security & the utility of P2P payments apart from being the obvious digital alternate of the fiat currencies – they have their weaknesses as well in the form of a centralized nature, instability of commodity or Crypto backed pegs & the most notorious being the regulatory hurdles. With all that in mind, it seems like this is more like a technology-driven move by Facebook rather than a utility-driven one. After all there are much more popular alternatives for cross-border payments like Ripple & Stellar already getting mainstream adoption, which could have easily been used for the purpose.
The pundits had been expecting this move from Facebook ever since it set up a blockchain wing in May with the most recent posting of five Job openings to explore the technology – the company has however, declined to comment any further on the matter. WhatsApp is not the first messaging app to enter the blockchain arena, following projects have already explored this option in some capacity.
Line – Japan based popular app LINE launched its own main net & in-app token LINK without an ICO with distribution to users based on their engagement with the app. The token would eventually be used for buy LINE goods & services and for the use of third-party services as well.
Telegram – Russia based & one of the most popular apps raising $1.7 billion, the second highest amount by an ICO ever has also proclaimed to move into blockchain space, however the plans are vague at best for now.
Kakao – Korea’s biggest messaging app has a blockchain company with details still forthcoming.
Status – raised a handsome $100 million through an ICO in 2017 to develop a decentralized chat app & ecosystem. However, it has run into financial troubles recently laying off 25% of its workforce.
WhatsCoin, FaceCoin or ZuckerCoin, whatever you want to call it – with billions of users under its belt, Facebook is working on devising its own payment ecosystem to secure its niche in this calculated move. But it has a much bigger task of salvaging its reputation first, before users are willing to trust the tech company with their sensitive data like their banking information. It would be even more challenging in a country like India where the Cryptocurrencies are banned at the time of writing, with the attitude of financial authorities that can be described as antagonistic at best. Things are certainly getting interesting going into 2019…