Last month it was confirmed that Mark Zuckerberg had met with Mark Carney, the Governor of the Bank of England. Around the same time, rumors were swirling about Facebook’s ambition to move into the cryptocurrency market and launch its own coin, since dubbed GlobalCoin. Commentators have been employing much conjecture as to what form this might take.
Some think this Facebook digital token will be linked to bitcoin, others say not it will be pegged to the dollar and some suggest it will be pegged to a variety of foreign currencies held in foreign bank accounts. But commentators seem to be agreed that sometime soon a Facebook coin of some sort will be launched, which may compete with the likes of Paypal to become another friction-free digital payment method.
Perhaps what Zuckerberg envisages though is even more ambitious than that.
There is an assumption that the Facebook coin will be just another payments brand operating in the digital world, one of many trying to circumvent the central banks by way of a decentralized digital solution, like Bitcoin.
But what if Zuckerberg is not trying to disrupt and replace the central banks and instead work with them, cooperatively, to create a modern-day Florin, in order to create one central banking digital currency? If Zuckerberg can link up all the central banks he could get agreement to become the issuer of all digital coins. As the issuer, and perhaps even underwriter, he could conceivably control much of the entire world’s digital money supply.
It could be that Zuckerburg’s plan is not to replace the central banks but to replace the commercial banks.
It’s clear that the traditional commercial banks are less agile and somewhat slow to adapt to digital consumer needs in currency. It is a far from friction-free experience for consumers of those banks wanting to transact and trade in the digital space. As more and more transactions take place virtually, there is less need for a physical bank and for a traditional account, and more and more need for a digital wallet through which people can smoothly transact in digital currencies without having to exchange to and from fiat currencies when moving money across accounts.
In this sense, yes Facebook could compete with Paypal. But also aim for something bigger. With the central banks on side aiding a centralized cryptocurrency, underwritten by Facebook, Facebook could become not the new Paypal, but the new World Bank. The aim could be for Facebook to become the issuer of the Central Banks’ digital coin, and thereby control a global currency
If that is the goal, then the commercial banks should indeed be worried.
One question will be whether Facebook is trusted enough by consumers to operate as the world’s digital global coin?
Trust in Facebook is relatively low, as with other social media platforms. Additionally, it has faced public scrutiny over data privacy practices and challenges over the influence its content might be having on political discourse. Will consumers transfer this lack of trust over into the new battlegrounds of banking, or is it the case that banking itself is such a low-trust category, that Facebook can provide something better and more trusted than the traditional banking sector ever can?
One thing’s for sure, if this is the plan, it would then make sense of the proposed merger between Messenger, Instagram, and WhatsApp platforms, turning them into one integrated offering. Not only are these other platforms less affected by the negativity associated with the Facebook brand these are also the more transactional platforms in the portfolio, the places where it is more relevant and required to have a friction-free digital payment system and a digital coin with which one can easily transact.
A new world bank, introducing the world’s digital global coin will need the biggest transactional platform possible of course. But it will remain to be seen whether consumers are really prepared to put their trust in a Facebook financial product, let alone a monopolistic digital one. If they are, it may mean our commercial banking brands become a thing of the past.