Major financial backers and high-profile hires prelude the launch of a white paper next week
A host of major players in the finance and tech industry have thrown their weight behind Facebook’s cryptocurrency venture ahead of the launch of its white paper on the subject next week.
Companies including Visa, Mastercard, PayPal and Uber have each invested $10 million into a consortium that will govern its cryptocurrency when it is launched next year, according to the Wall Street Journal (WSJ).
The newspaper previously reported the social media giant is hoping to raise as much as $1 billion to fund the creation of the digital coin, thought to be dubbed Project Libra but also referred to as GlobalCoin.
This will then be linked to a number of government-issued currencies in order to avoid the sort of massive fluctuations that have rendered cryptocurrencies too volatile to practically use for payments.
Elsewhere, Facebook has made a high-profile hire in the name of Standard Chartered’s European head of corporate and public affairs Ed Bowles. According to the Financial Times, Bowles will join the company in September as its director of public policy.
This is the latest in a string of major hires that have fed into the development of the project, starting with PayPal’s former president David Marcus joining the tech giant in 2014.
Marcus was tasked last year with exploring how Facebook could exploit blockchain technology before the company then incorporated the entire team behind blockchain startup Chainspace in February to run the project.
Little is known about the cryptocurrency in the public realm beyond rumours, leaks and speculation. Facebook has remained highly secretive of the project during its preparatory stages and has refrained from disclosing not just any technological information, but also wider strategic details around the cryptocurrency.
Visa declined to comment on the suggestions, while the other companies listed did not respond.
IT Pro asked Facebook what it’s hoping to achieve with this launch, and why the social media giant believes it will be any different to a plethora of tokens already on the market. A spokesperson initially declined to share a statement, suggesting the company doesn’t comment on speculation.
However, Facebook’s own head of financial services and payment partnerships for Northern Europe Laura McCracken confirmed at a trade conference in Amsterdam last week that a white paper is scheduled to be released on 18 June.
She also told German publication WirtschaftsWoche the value of Facebook’s cryptocurrency will be tethered to a number of conventional fiat currencies in order to keep it stable, and not just the US dollar.
When this was pointed out, the Facebook spokesperson added: “Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications.”
Although cryptocurrencies have been in circulation for around a decade they have never been widely adopted as a viable means for payment in the way that was first envisaged. This is because price fluctuations are too wild to practically use these currencies to pay for goods and services. The most famous example, and the most widely known digital token, is perhaps Bitcoin.
Should Facebook, or another company, establish a digital currency that isn’t just stable but widely adopted among consumers and businesses it has the potential to revolutionise global payments.
Blockchain technology has previously been explored by financial institutions, but largely as a means to reduce degrees of friction when it comes to making cross-border payments.
Santander, for example, rolled out a blockchain-powered foreign exchange app last year that was designed to speed up and simplify foreign currency transfers. HSBC, meanwhile, announced in January it had completed $250 billion worth of foreign exchange trades last year using distributed ledger technology (DLT).
JP Morgan even revealed its own cryptocurrency a month later as a means to settle payments between its clients and its wholesale payments business.
Facebook’s venture into cryptocurrency does appear to be the next logical step given the substantial strides the firm has made in its e-commerce and payments arms in recent years. Until the company releases its white paper next week, however, how Facebook’s exploration of blockchain technology feeds into its wider commerce side of the business will remain in the dark.