Does Facebook Have a Crypto Strategy?

| Publish date: 06/28/2018
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With the ever-changing nature of cryptocurrency, it has traditionally been difficult for the biggest entities—both public or private—to establish a permanent position on the matter. Governments, central banks, large tech companies, and other major authorities have had to reckon with cryptocurrency’s immense disruption and constant evolution to protect those for whom they are responsible. However, all they can do is flail about and react haphazardly as this young and speculative financial trend grows of its own accord. They will often change their roles adjacent to the crypto phenomenon as it works out its kinks and matures.

Cryptocurrency was regarded at different times as a large-scale economic threat, a business opportunity, a vexing scam, mere digital coins, and countless other labels over its short lifespan. Countries like China have had to pivot several times as cryptocurrency spawned new ideas. As the market evolved from Bitcoin speculation to massive capital flight and prolific, precarious Initial Coin Offerings (ICOs), China was transformed from one of the most pro-crypto jurisdictions on the planet to one of the most suppressive.

Facebook is another pertinent entity to study, and the company has dealt with cryptocurrency since its earliest days, largely to head off any threats to its massive community before they appear. This is evidenced in Facebook’s ban on cryptocurrency advertising on its platform, which occurred at the beginning of 2018 during the rapid spread of ICO projects and their use of Facebook ads to locate investors.

At a time when scam ICOs were common due to an absence of regulations in many parts of the world, Facebook put its foot down to curtail the trend, due to perceived risks users faced. Now that the US government and others indicate that they have a template for legitimate cryptocurrency projects, Facebook has taken a timely step to the other side of the fence. The company recently announced that cryptocurrency advertisements could return to its platform, a bulletin that confused many, but makes more sense given the hints they have dropped about their own plans for blockchain.

Facebook’s About-Face

The blanket ban on cryptocurrency advertisements is over, per a Facebook Business post by Product Management Director Rob Leathern. This comes as no surprise to those who read the original announcement of the ban which stated, “This policy is intentionally broad while we work to better detect deceptive and misleading advertising practices… We will revisit this policy and how we enforce it as our signals improve.”

Nor is it much of a twist for those who understand that Facebook has much more to gain from cryptocurrency than lose. After the ban, the company likely saw ad revenues decline significantly and needed a way to regain their foothold without the ads themselves posing a threat. Cryptocurrency-related advertisements are now eligible for publishing, but any cryptocurrency company seeking exposure on Facebook must apply and be approved. They’ll need to provide documentation of their licensing (or lack thereof) and other key details that demonstrate their legitimacy. ICOs and binary options ads are still forbidden.

Partly to increase revenues, the new rules also help Facebook avoid hypocrisy concerning its own inevitable venture into crypto. The company recently restructured its internal departments significantly, but one of the most curious components of the restructuring was its creation of a blockchain team. While it is miniscule compared to that of the Family of Apps or Central Product Services teams, at just 12 people, its composition demonstrates Facebook’s seriousness about blockchain and likely cryptocurrency as well.

To head the new blockchain team, Facebook appointed David Marcus, a board member at Coinbase, former President of PayPal, and the ex-head of its own Messenger app. Coinbase is regarded as one of the most compliant and progressive cryptocurrency exchanges in the world, and its HQ is located practically down the street from Facebook’s. All these signs bode well for Facebook’s foray into the space, but what that entry might look like is anyone’s guess—and many have guessed.

What a “Facebook Coin” or “Facebook Chain” Might Look Like

People who remember Facebook Credits from 2011 to 2013 might already have an image in their mind, but the short-lived Credits system leads us to believe that Facebook won’t be pursuing this idea again. Credits was simply a faux-currency used to purchase games and access services on Facebook, but it was unwieldy and suffered problems due to its fluctuating exchange rate.

Instead, Facebook will probably leverage blockchain to improve its services. Regulating a cryptocurrency economy is by no means beyond the abilities of such a large and talented company, but the safest course of action is to use blockchain behind the scenes. It could employ a smart-contract-based system to help developers build decentralized apps for Facebook specifically, use the ledger to safeguard the data of its users, or deliver more granular insights and targeting to ad partners.

Some have speculated that Facebook will be minting their own cryptocurrency—a conclusion that is more doubtful but nonetheless possible. A “Facebook Coin” might be rewarded to content providers and influencers on the social network, for example, and be paired with a requirement to buy ad space or subscribe to different groups with the coins to cement their value.

Others still opine that Facebook is opening the floodgates and will allow cryptocurrencies like Bitcoin and Ethereum on its platform. Given the quote from Marcus, who said he was “setting up a small group to explore how to best leverage Blockchain […] from scratch“, it’s unlikely that they’ll consider integrating existing currencies.

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