Citing anonymous sources, Bloomberg reported that Facebook is working on a stablecoin cryptocurrency. According to the report, the Facebook stablecoin is designed to help Indian users of WhatsApp, an encrypted messaging application, exchange money with each other.
Very few details about the project have emerged so far. It’s unclear exactly how Facebook’s stablecoin would work, which (if any) blockchain would host its transaction records or when the coin could launch. And given that no one from Facebook has spoken on the record about the project, it’s uncertain that the coin is actually being developed at all.
Facebook and WhatsApp
Users of Facebook and WhatsApp are the most likely group to see direct benefits from a Facebook-backed stablecoin.
As the Bloomberg report mentioned, WhatsApp users rely on the app not just to send encrypted messages but also to exchange money. The app is particularly useful for this purpose because it facilitates simpler cross-border transactions without hefty fees.
But while sending money between different countries using WhatsApp may be easier than doing the same through traditional banks, cross-border transactions are still inherently difficult when you are working with fiat currencies. By offering crypto transactions as an alternative, this new stablecoin project is likely to make WhatsApp payments even easier and less expensive.
The Stablecoin Economy
A Facebook-developed stablecoin would also do much to speed the growth of the stablecoin economy, a relatively new niche within the crypto world.
Unlike bitcoin and most traditional cryptocurrencies, stablecoins are designed to provide stable stores of value that are unaffected by fluctuations in the crypto market. Most stablecoins achieve this by tying their value to fiat currencies, so that the value of a given stablecoin in, say, U.S. dollars, is always about the same.
Because of their relative immunity to wild fluctuations in the crypto market, stablecoins are a promising solution for making cryptocurrency more practical for everyday real-world transactions.
However, most stablecoins developed to date have suffered from other problems that undercut their promise of reliability. Regulatory questions have created uncertainty about stablecoins’ ability to function as currency, and some stablecoins, like Tether, have refused to allow external reviews of their operations.
If Facebook introduces its own stablecoin, it would be the first big-name, established tech company to enter this niche of the crypto market. While Facebook has surely suffered various reputation problems of its own to date, putting its name behind a stablecoin would do much to assure crypto users of the coin’s legitimacy. And by allowing the use of its coin only with WhatsApp, Facebook could potentially avoid the regulatory issues of other stablecoins.
Thus, a Facebook-backed stablecoin for WhatsApp could inject renewed energy into the stablecoin economy, and, by extension, into the crypto market as a whole.