The idea that a company as powerful and autocratic as Facebook
Inc. would ever dive into crypto-currencies has always seemed a bit like the
Death Star deciding to throw a staff Christmas party.
Whether it’s the Bitcoin model itself (Wild
West capitalism where nobody’s in charge) or the more corporate-friendly
efforts to exploit the blockchain approach (distributed databases across
networks within a business or industry) it’s been hard to see how a billionaire
like Mark Zuckerberg might find a use for it. His entire business depends on
centrally harvesting data to sell ads at a profit.
So it’s no surprise that Facebook’s latest
step toward a blockchain product, as reported by Bloomberg News last week,
looks like more of a simple co-opting of the technology for a pretty humdrum
payment system rather than any headlong rush to join the crypto-revolution.
The company’s digital token, still in its infancy, would let
users transfer money on WhatsApp, focusing first on the remittances market in
India. It would be a so-called “stablecoin,” which are usually pegged to a
currency like the dollar to minimize volatility. There would be a pool of
assets stored in custody to protect it.
One can already hear the howls of anguish
from the crypto-evangelists. This is not a token designed to displace fiat
currencies or soar in price. In theory, one FaceCoin would never be more
valuable than the $1 backing it (although in practice, markets can do funny
things). It’s essentially an online IOU.
Zuckerberg is hardly inventing the wheel here
given that migrant workers already sent home $69 billion to India last year,
and India isn’t a ripe crypto-market anyway after its central bank virtually
outlawed digital currencies this year. Facebook would be competing instead with
services like PayPal’s Xoom, or WorldRemit, or even Western Union. Society
might become more cashless as a result, but it’s not going to be any more
crypto.
The prophets of blockchain had once imagined that they could
create a way for individuals to control and sell their own personal data rather
than letting Big Tech profit from doing it. But Facebook’s project looks like
the reverse: Locking users more securely within its walled garden by
offering them an in-house currency. Zuckerberg and his lieutenants have long
been resistant to giving up control of the data; naturally so, given how
lucrative it is.
So rather than fix the internet giants,
blockchain is itself being repaired. Crypto startups that promised to liberate
the world from the yoke of capitalism now can’t even keep their own staff
gainfully employed. Facebook’s approach is to take the blockchain’s broken
pieces and fashion something far more acceptable to shareholders. This won’t
please people who fear its monopoly power, and for good reason. One more thing
for regulators to chew on.
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TMA Innovation Center (TIC) is TMA R&D arm focusing on collaborating with universities and partners worldwide to foster innovation and build a new generation of products and solutions.
TIC creates an open environment fostering idea & knowledge sharing, R&D collaboration, creativity & innovation, technology transfer and incubation.
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