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India could be proving ground for Facebook's crypto project

May 10, 2019 by Avanish Tiwary
India could be proving ground for Facebook's crypto project

The blockchain team that Facebook set up in May 2018 is said to be developing stablecoin, a digital currency claimed to be less affected by the change in a currency’s value.

According to a Bloomberg report that cited Facebook insiders, the first tests of the crypto coin may occur in India, initially as a way for workers to send money home from overseas, Bloomberg reported.

Indian government has traditionally not been kind to cryptocurrency companies in India. In April 2018, RBI had asked banks to close accounts of all cryptocurrency startups, forcing multiple companies to shut shop.

This is not the first time Facebook has chosen India to test its financial product. Facebook-owned WhatsApp currently has over 300 million users in India and is trialling peer-to-peer UPI-based payments service in the country for a year now.

At a recent F8 conference, Facebook said WhatsApp Pay would expand to other countries later this year. A huge chunk of small businesses in India are using WhatsApp for marketing as well.

Kunal Shah, founder of CRED told The Passage, Indians trust WhatsApp more than anything else. “The UPI battle of P2P is going to be won by WhatsApp even if they launch a year later. UPI as a standard works perfectly well with WhatsApp.”

Facebook’s crypto ambition

Last month, New York Times reporter Nathaniel Popper tweeted, “Sources tell me that Facebook is now looking to get VC firms to invest in the Facebook cryptocurrency project we reported on earlier this year. I hear they are targeting big sums—as much as USD 1 billion.”

“One person I spoke with said that Facebook is talking about using the money as collateral for its cryptocurrency,” he added.

Of late, Facebook has also become lenient towards cryptocurrency ads on its platform.

Facebook’s blog post on May 8 read: “While we will still require people to apply to run ads promoting cryptocurrency, starting today, we will narrow this policy to no longer require pre-approval for ads related to blockchain technology, industry news, education or events related to cryptocurrency.”

Former PayPal president David Marcus joined Facebook in 2014 as the head of its Messenger product. He left Messenger last May to “set up a small group to explore how to best leverage blockchain across Facebook, starting from scratch." He has also brought in a bevy of PayPal higher-ups to the team.

Blockchain-based stablecoin, if true, would be a tectonic shift from the traditional payment models.

“There is still a lack of clarity on what Facebook is going to do, but it looks like the long-term vision is creating a sort of marketplace model within Facebook," Harshita Rawat, a payments analyst at Sanford C. Bernstein & Co [told Bloomberg].

International money transfers in particular are rife with inefficiencies, which Rawat said could make the area particularly well-suited for a cryptocurrency.

Messaging applications like Telegram, Signal, Kakao and Line are also working on digital coins. The huge user bases of such apps are the bedrock for the monetisation efforts.

“It’s pretty much the most fascinating thing happening in crypto right now. They each have their own advantage in this battle, and it will be insane to watch it go down,” Eric Meltzer, co-founder of a cryptocurrency-focused venture capital firm, Primitive Ventures, told New York Times.

Avanish Tiwary

Avanish Tiwary is a Bangalore-based tech journalist. He focuses on emerging Indian startups and unicorns. He can be reached at avanish.tiwary@thepassage.cc.

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