By Bryan Ellis
Later this month, Facebook will make a huge and somewhat surprising announcement: The social media giant is jumping into the cryptocurrency business, with the issuance of its own brand new currency.
Code-named Libra, the new cryptocurrency is expected to launch on June 18 with the publication of a white paper about the new currency will be made available to the public.
The impact will be immediate for some: Facebook employees who worked on the cryptocurrency project will actually be allowed to take their paychecks in the form of Facebook’s Libra rather than U.S. Dollars.
Though the lurch towards the cryptocurrency market was not widely expected, Facebook’s interest in providing a payments solution to their clients has been widely discussed.
To that end, Facebook brought in David Marcus, former executive at PayPal, to investigate opportunities to incorporate blockchain technology – the technological underpinning of all cryptocurrencies – into Facebook’s business model.
Once launched, users of Libra will be able to easily shift the form of their money from conventional currency to Facebook currency and back again, all within apps that are already very well known and familiar including WhatsApp and Messenger.
Not to be outdone by old-line banking services, Facebook also plans to offer ATM-like machines for their cryptocurrency.
At the core of this move is a desire on the part of Facebook’s executive management to diversify their sources of income away from a near-exclusive dependence on ad revenue.
As recently as January of 2019, over 98% of Facebook’s income was in the form of advertising sales, making them highly vulnerable to any challenge which might jeopardize their advertising business.
Unfortunately for Facebook, there is just such a challenge: the Federal Trade Commission.
Complaints against the Big Tech companies, including Facebook, for lapses in judgment on privacy standards and anti-trust issues has created a huge appetite in Washington to collect a pound of flesh from Silicon Valley.
That appetite is so strong, in fact, that the FTC and the Department of Justice actually had to negotiate with each other to decide who would pursue the case.
The FTC “won”, and in either case, Facebook’s advertising revenue could see tremendous headwinds as a result.
In that context, Facebook’s move towards offering their own cryptocurrency as a way of diversifying their income stream makes perfect sense.
Technical details of the new currency are in short supply, though it appears Facebook plans to assemble a foundation of independent 3rd-party financial institutions and tech companies to manage the new currency.
This move is most likely to shield against further regulatory scrutiny.