The recent announcements of Facebook launching a payment system supported by cryptocurrency for Facebook users is causing a bit of a stir. Financial institutions are a bit concerned, and the social media giant’s user base is excited.
As a crypto enthusiast and cryptocurrency creator, I certainly see the value, especially since Facebook is choosing to utilize stablecoins instead of more volatile crypto options. Stablecoins, something I’m pretty passionate about, have typically remained in the shadow of larger cryptocurrencies like Bitcoin, Bitcoin Cash, and Ethereum.
However, with the launch of Facebook’s crypto-based payment platform, the future for stablecoins is definitely bright, especially for Facebook. Let’s take a deeper look!
Stablecoins Could Be a Multi-Billion Dollar Solution for Facebook
The news about Facebook tantalizes the senses of stablecoin evangelists like myself. Teamed up with Visa and MasterCard, Facebook has been creating a payment platform that could be a game changer. Supported by stablecoins, which will be tethered to a fiat currency, will allow Facebook users to make peer-to-peer transactions amongst each other, as well as purchase products online.
The name of
US Democratic congresswoman, Maxine Waters, was noted saying in a BBC article,
Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action.
Why are institutions and government officials up in arms? If Facebook succeeds, they will be opening up a new cryptocurrency payment option to its 2.3+ billion users around the world.
I suppose that would be cause for concern. As a medium, Facebook could become one of the largest financial institutions overnight, with more than 2 billion people using their payment platform and stablecoin. For instance, Bank of America has only 66 million account holders. That is well off Facebook’s potential account user base.
But Why Stablecoins?
Cryptocurrency, since its inception, has been volatile in nature. Remember Bitcoin plunging by about US$10,000 in two short months after the all-time high in December 2017? Though the shifts in value do seem to be happening at a lesser degree since 2018.
Bitcoin has rallied back to almost US$10,000 in value, and along with it other top cryptocurrencies. But the volatility cryptocurrency presents at times still weighs heavy on the minds of investors, businesses, and crypto enthusiasts alike.
And many of us are still watching the total market capitalization closely. At the height of crypto, the total market capitalization for cryptocurrency was US$800 billion. Today, it is US$250 billion.
So the question is not
Why stablecoins? It is more like
Why not? Stablecoins simply make sense at this moment, and they very well could lay the foundation to mainstream cryptocurrency use. After all, utility via blockchain technology is what institutions, companies, and governments are weighing the benefits of.
This could be the catalyst behind Facebook’s Libra, as the social media company shows nothing but content for the digital coin as the backbone of its payment platform.
A Bit More About Stablecoins?
So why are stablecoins a solution for businesses and other organizations like Facebook? It is all about their anatomy. The reason stablecoins are far more “stable” than traditional cryptocurrency is they are joined at the hip with fiat currency. And fiat currency, for the most part, stays very stable across the board.
For instance, let’s say a stablecoin is tethered to the British Pound. The value of the British Pound has only changed in by 0.8 points in 2019.
That is certainly very noteworthy, since Bitcoin, Bitcoin Cash, Ethereum, and the like, have all shifted in value by far greater margins. This is what makes stablecoins so unique.
A stablecoin supported by the British Pound would ebb and flow the same. In fact, it could very well be a 1:1 exchange. This is why stablecoin simply makes sense today. Many naysayers would contest that stablecoins are not fully decentralized, and they are right. But smart contracts are still utilized for transactions and having a bit less volatility may be a valuable trade off at this moment in time.
Facebook Is Setting a Precedent by Using Stablecoins
The future of cryptocurrency is now, and stablecoins are certainly set to disrupt the crypto market and how we all view cryptocurrency as a whole. The exciting bit about Facebook and the use of stablecoins for payment is that its a non-volatile solution returning utility back to crypto and blockchain technology in the financial space.
About the Guest Author
Stan Stalnaker is the Founding Director of Hub Culture, a social network service that operates Ven, the only digital currency to thrive on a basket of commodities currencies and carbon futures, making it the world’s first green monetary system. A leader in the market, Ven is a stable digital currency, recognized by global financial markets and indexed by Thomson Reuters.
Disclaimer: The opinions expressed in this article are those of the guest author. They do not necessarily reflect the opinions or views of Bitcoin Australia.
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