Business

Derek Tonin

Facebook’s crypto could transform the site into a bank

Digital currency enthusiasts are going to wait anxiously for every new detail of Facebook’s new currency, GlobalCoin, and speculate about what it will do to the rest of the market. A big question when it finally hits the market is, will the world be ready for the social media giant to become their bank?

That’s the way the analysts at Weiss Crypto Ratings are looking at it. Whereas the majority of digital currencies were created to disrupt the existing financial systems and force a new model on the world, it could be that, if successful, a system like GlobalCoin could make Facebook the world’s biggest bank.

In their analysis, the look at Ali Pay as the model that Facebook will follow. It does everything you would expect a modern bank to do. They write: “Alipay amasses its customers’ deposits. It invests the money in short-term money markets. It even makes loans to consumers.”

This is antithetical to what Bitcoin, or most other digital currencies, were designed to be. Bitcoin has become a powerful idea in large part because it removes the need for banks, and helps expand financial security to the unbanked. It is a trustless system because there is no need to trust a third party.

Juan Villaverde, writer for Weiss, writes:

“What really worries me is that both FinTech companies like Alibaba and traditional banks share the same flaw: You’re required to entrust your money to a third party, and it’s this third party that actually controls it. Not you.

Although Facebook has made moves to suggest that they will decentralize their GlobalCoin network, but at this point, it seems unlikely they would give up control of the currency to end users. They’ll have the ultimately control over how users can spend, receive, and hold the currency.

The idea of a blockchain based currency on the Facebook platform can unlock a lot of new possibilities, but if it does gain popularity, which some doubt it will, it merely makes Facebook your new bank, rather than open up the world to new possibilities.

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