By Tom Buerkle
(The author is a Breakingviews columnist.)
NEW YORK, Dec 21 ( Breakingviews) - It sounds crazy, but the world of crypto could offer some much-needed stability for Facebook. The $360 billion social network may issue a dollar-pegged digital currency to let WhatsApp users transfer money, according to Bloomberg. Such so-called stablecoins embody much of bitcoin's original promise and have grown popular as other crypto assets tanked. Boss Mark Zuckerberg would welcome a similar effect for his beleaguered company.
Now stablecoins are jumping into the breach. Dozens of developers and companies have launched cryptocurrencies backed by dollars, euros or assets like gold, with mechanisms to insure that the digital coin maintains the same value as its fiat counterpart.
Coinbase, the San Francisco-based cryptocurrency exchange, helped launch the USD coin in October to facilitate everything from the purchase of Cryptokitties to funds transfers between crypto developers. Some $228 million worth of the coin is outstanding. New York-based Paxos issued a rival stablecoin, PAX, through its New York state-regulated trust company subsidiary. It claims the coin has already been used in more than $5 billion worth of transactions.
Facebook is eager to monetize WhatsApp to justify the $19 billion it paid for the messaging app four years ago and sees payments playing a key role. Zuckerberg has said he doesn't plan to charge for money transfers, but thinks the ability to do so will help grow the app's 1.5 billion user base and attract more businesses to conduct commerce there. It has started testing payments on WhatsApp in India, one of the app's fastest-growing markets. That big user base may give Facebook an advantage in competing with popular fintech payments services like Venmo.
Payments won't solve the metastasizing crisis over Facebook's data-privacy flubs that has wiped out some 42 percent of the company's value in five months. In fact, the stablecoin initiative may struggle to gain traction if the company can't regain the trust of its users. But unlike Facebook, WhatsApp encrypts messages and doesn't store them. Adding payments might show that Facebook can still innovate and grow. That message would be priceless right now for Zuckerberg.
- Facebook is developing a cryptocurrency pegged to the U.S. dollar to allow users to transfer money on its WhatsApp messaging service, Bloomberg reported on Dec. 20, citing people familiar with the matter.
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