Social media behemoth Facebook is launching a remittance service using cryptocurrencies through its WhatsApp messaging app.
According to a Bloomberg report, the company is working on developing a stablecoin (a coin which trades at parity with a fiat currency or a basket of reserves) to enable money transfers to and from India. The report states that Facebook is still strategizing on details related to the coin. As such, it has not yet decided the peg for its cryptocurrency or a custody method or provider for its coins. Stablecoins typically hold reserves equivalent to the trading amount for their coins. For example, Tether, the world’s biggest stablecoin, claims it holds a dollar for every Tether being traded in the markets.
The regulatory status of Facebook’s cryptocurrency will also be an interesting study. A high-profile startup Basis, which was backed by top investors, was forced to shut down earlier this month in the United States because it failed to convince the SEC that its token was not a security. A WhatsApp coin would face intense regulatory scrutiny in the United States, where Facebook is based, and India, where it intends to operate the token. While the SEC has cracked down on suspect scam cases, the regulatory agency has largely adopted a hands-off attitude. On the other hand, the Indian government has adopted a hostile stance towards cryptocurrencies.
A Big Market
India is the world’s biggest remittances market. The World Bank stated earlier this year that the country received $69 billion in 2017 in remittances from its diaspora spread around the world. While they have generated controversy in the country, Facebook and WhatsApp both boast significant numbers there.
With 294 million users, India has surpassed the United States as the biggest market for Facebook. WhatsApp has 200 million users in India. A successful money transfer implementation in the country could generate massive gains for Facebook. The company could also replicate the service in other big remittance markets with a significant user base for its apps, such as Philippines and Mexico. A cryptocurrency token could also allow Facebook to expand its service offerings in India, similar to WeChat in China.
Facebook’s move into payment services has long been in the works. Facebook Messenger, its other messaging app, already allows users to send and receive money. In May this year, Facebook announced a group focused on investigating uses of blockchain to its services in May this year. It was headed by David Marcus, former PayPal President. Over the months, that group’s headcount has increased based on a review of LinkedIn profiles.
“Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications. We don’t have anything further to share,” Facebook told Bloomberg.