Facebook is planning to launch their own cryptocurrency called GlobalCoin. According to reports, they will launch their GlobalCoin in early 2020 and it will be a stablecoin that will “provide financial and technology services and develop related hardware and software.” So, how big this GlobalCoin will be and what will be the impact to the cryptocurrency industry?
The way I see it, Facebook wants to join the cryptocurrency hype. This year (so far) has been quite good for cryptocurrency prices. Bitcoin has been pumping a lot and I think we might reach even higher price point in Q3 or Q4 2019. Facebook does not want to miss the hype train. They are in the process of creating their own stablecoin, which in my opinion, makes sense from business perspective.
Logically, a stablecoin has bigger chance to be accepted by big corporations. A stablecoin does not have to care about cryptocurrencies’ price volatility. We all know cryptocurrency’s biggest problems to adoption have been always about volatility and liquidity. Facebook, just like other big corporations out there, believe stablecoin backed by real assets is the best solution to adopt cryptocurrency because it eliminates the volatility problem.
And, despite my bullish position on regular cryptocurrencies, I always welcome big corporations’ move to roll out their own versions of cryptocurrency. Although I can understand the centralization concern and eventually we will want to move away from big corporations’ influence
As mentioned earlier, I can understand the perspective from hardcore crypto believers. Usually, they believe stablecoins miss the point of decentralization because the valuation of stablecoins are pegged to fiat currencies. They argue we do not need stablecoins because the valuation of cryptocurrencies should be freely decided by the market and not controlled by central entities like the central banks.
I actually agree with this. However, stablecoins are still needed to help the industry gain adoption. Looking at how things stand now, I fully understand that big corporations do not want to gamble too much with crypto price volatility. They want something that’s more predictable, something that is ‘safer’ to adopt, and hence their most realistic approach is to adopt stablecoins.
Look at how IBM Blockchain World Wire plays out. They attempt to lure central banks to release CBDCs (Central Bank Digital Currencies). And of course, CBDCs valuation will be pegged to fiat currencies. Facebook’s GlobalCoin (or whatever it will be called) will be the same. The valuation will be pegged to fiat and other low-volatile assets.
As a form of payment, it makes sense to peg the value to fiat currencies, because non-crypto people most likely want to send and receive values in fiat currencies. There are a lot of people out there who feel using cryptocurrencies is a bit too risky because their basic needs (their rents, food costs, etc.) are still valued in fiat. This is where stablecoins can help them to change their mind about crypto.
Remember, we are still in very early stage of crypto adoption. Even though stablecoins don’t really share the spirit of decentralization, but we still need them in order for crypto to be more accepted by non-crypto people. Who knows Facebook’s GlobalCoin will help non-crypto people to become curious and try bitcoin or ethereum or other popular altcoins. I will still consider that as a win for cryptocurrency industry.
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