NEW YORK  - Facebook may soon launch its own digital currency. For Mark Zuckerberg’s $480 billion social network it’s potentially a way into the global payments business. But it faces daunting trust and regulatory issues. Still, if some of its billions of users get hooked, that would boost the likes of bitcoin as well as blockchain technology overall.

Zuckerberg mentioned payments as a potential target in March when he outlined plan for shifting Facebook’s focus to private communications. The owner of Instagram and WhatsApp has been on a hiring spree for blockchain developers lately and last month registered a Swiss company to focus on distributed-ledger technology, payments and financing.

The lure of providing easy money transfers is clear. China’s Tencent has used mobile payments to stoke the growth of its WeChat messaging service. Financial technology will generate 30% of the group’s revenue next year, Bernstein reckons.

Yet WeChat hasn’t needed to create its own cryptocurrency to achieve that. And Facebook carries a lot of baggage. Real and perceived data abuses have left skeptics deeply distrustful. Mike Crapo, chairman of the U.S. Senate Finance Committee, wrote to Zuckerberg last month asking how a company already being investigated for failing to protect consumer data would safeguard financial information in a new payments system.

Facebook could choose to distance itself from a new digital coin by establishing a private foundation to oversee its workings. It is seeking financial institutions and tech outfits to invest in and help manage the currency, a so-called stablecoin pegged to a basket of fiat currencies, according to the Information. That would mean FaceCoin, or whatever it may be called, won’t be fully decentralized, which is one of crypto’s big selling points. Backers would also expect a return, presumably through transaction fees – like any normal payment card.

For all the challenges, a whale like Facebook can cause big ripples in the digital pond. There are only 35 million identity-verified users of digital assets globally, the University of Cambridge’s Centre for Alternative Finance estimated in a recent report. Facebook has 2.4 billion monthly users. A cryptocurrency that appeals to even a fraction of them could supercharge acceptance of the genre – perhaps helping others in the business more than Facebook itself.

On Twitter https://twitter.com/tombuerkle

 

CONTEXT NEWS

- A white paper setting out Facebook’s ideas for its own cryptocurrency could be released on June 18, TechCrunch reported on June 6.

- The social network led by Mark Zuckerberg may establish an external foundation to govern its digital coins, the Information reported on June 5, and it may seek outside investment to back the effort.

- Facebook last month set up Libra Networks, a new financial technology company in Switzerland focusing on blockchain and payments, Reuters reported.

- For previous columns by the author, Reuters customers can click on BUERKLE/

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

 

(Editing by Richard Beales and Amanda Gomez) ((thomas.buerkle@thomsonreuters.com; Reuters Messaging: thomas.buerkle.thomsonreuters.com@reuters.net))