Facebook reportedly working on stable crypto coin for Indian remittances market

Written by Kapronasia || January 07 2019

Facebook is reportedly developing a cryptocurrency that will be backed by the U.S. dollar for the Indian remittances market. Known as a "stablecoin," the digital currency will allow users of Facebook's WhatsApp messaging app to transfer money. Stablecoins have many applications besides remittance, including peer-to-peer payments, the purchase of goods and services online, and trading of digital currency. Facebook's digital currency is at a nascent stage and won't be released for some time, according to a December Bloomberg report.

India is an attractive market for Facebook to launch its stablecoin for several reasons. Firstly, in India, WhatsApp has a large userbase of 200 million people. At the same time, India is the top market in the world for remittances. In 2017, people sent $69 billion home to India, according to the World Bank. If Facebook's stablecoin were a success in the massive, hyper-competitive Indian market (which will become the largest in the world by 2024), it could set a precedent that would allow the company to bring the fiat-backed digital currency to other markets.

Facebook's launch of a stablecoin would be significant because of the company's sheer size: a market capitalization of $376 billion, $40 billion in annual revenue and about six billion users between its namesake social-media platform, WhatsApp, Facebook Messenger and Instagram.

During the second half of 2018, stablecoins gained popularity as an alternative to wildly fluctuating digital currencies. In theory, being backed by a fiat currency should make stablecoins immune to the types of rollercoaster rides that Bitcoin has taken investors on over the past year, reaching a high of almost $20,000 in December 2017 and falling to just $4,000 a year later. Yet there is no successful stablecoin to date. Tether, the best known stablecoin, has yet to gain widespread acceptance.

Meanwhile, analysts have long expected Facebook to move into the growing digital finance market to diversify its revenue sources. The company's reliance on digital advertising for revenue has increasingly come under criticism, particularly given the allegations of Russian interference in the 2016 U.S. presidential election and the extreme lengths to which the firm has gone to cash in on user data. Former Facebook executives said early last year that the company's reliance on advertising foments "fake news."

Amid increasing public skepticism of its business model, Facebook's share price has fallen from US$218 in July 2018 to $141 in January 2019.