Facebook is working on a new cryptocurrency for use with its WhatsApp messaging service, designed to allow users to transfer money across the app, according to sources familiar with the matter.
More specifically, the company is reportedly developing a stablecoin to minimise volatility in the remittances market in India, which experiences some of the world's largest volumes of money transfers to families, to the tune of $69 billion in 2017.
According to sources speaking to Bloomberg, the project is still in the early stages and the coin is far from a full release. It has to finish finalising the strategy behind it, including a plan for custody assets, or regular currencies that would be held to protect the value of the stablecoin.
"Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology," a company spokesman said in a statement. "This new small team is exploring many different applications. We don't have anything further to share."
This small team is one that has grown rapidly recently after a hiring spree by Facebook. The company has long been believed to be working on blockchain since the appointment of former PayPal president David Marcus in 2014 to run its messenger app. In May, Marcus headed up Facebook's Blockchain division and his team is believed to be around 40-strong.
A stablecoin is technically a cryptocurrency, although it is designed to be far less volatile than the likes of Bitcoin. Instead of accruing its own value, stablecoins are pegged to a fixed amount of real-world assets, such as fiat currencies like the dollar, or tradeable commodities like gold and metals.
This means a stablecoin is worth a specific amount in a given ratio to the asset to which it's pegged. For example, if Facebook's stablecoin is pegged to the US dollar at a ratio of 1:1, then one Facebook coin would be worth one US dollar.
Due to the inherent low volatility, this makes stablecoins perfect for remittance purposes compared to Bitcoin or Ethereum, which are highly volatile and better suited for investors and traders.
You might question the purpose of a cryptocurrency that represents real money and acts like real money when users could just use... real money. There are benefits to using cryptos for money transfers, such as transparent network transfers and fewer worries about complicated currency conversion fees if sending money abroad.
Stablecoins have seen a big rise in the past year with more than 120 new types having been launched in 2018, according to Stable.Report, a website that tracks stable tokens. Tether is one of the most well-known of these after first being traded in 2015.
However, Tether has been mired in controversy since its launch, as although it claims to be pegged to 1 USD, with nearly 2 billion Tether coins in current circulation, the company has refused to be audited, raising concerns over its true value.
Facebook's move towards the crypto market marks an apparent U-turn towards policies made back in January 2018, including the banning of adverts of cryptocurrencies on its platform after claiming that the companies behind them were operating in bad faith.
The fear was that Facebook would essentially be promoting illegitimate coins designed to scam users, but later in June Facebook reversed this policy, only advertising 'pre-approved' crypto ads.
