Facebook’s foray into the virtual currency world ignited the interest of several messaging giants. Some like Signal and Telegram followed suit, while others looked at the tremors a payment-centric, crypto-specific project would cause to the global economy. Ted Livingston, the chief executive and founder of the Kik messaging platform equated the gravity of the Facebook Coin to the US dollar, and mulled a bold prediction.
Livingston, through a Medium post, approached the topic of the Facebook Coin and its impact on the payments’ realm. He further went on to make a prediction on whether the coin project, developed by one of the biggest technology companies in the world, could eventually replace the most powerful currency in the world, the US dollar.
To begin his argument, he differentiated the Menlo Park company’s project from similar projects emerging from the messaging realm, calling it an aim to overhaul the “physical world,” rather than the “digital world.”
Physical and digital often cannot be picked up simply from the surface, it has to be drawn out and explained at every level. The Facebook Coin, in order to take over the “physical world,” has to replace the currency of that world, in its entirety, and not just on the surface. The aim of this overhaul should be to remove the centrality of control that fiat currency holds, rather than superficial means of transaction, which paint an incomplete picture.
Facebook, according to Livingston, will work according to the WeChat “playbook,” given the latter’s success in monopolizing the payments realm in China. He put forth a three-pronged approach Facebook’s crypto will use. Beginning with enticing users to pledge their money onto the platform, the key will then be to ensure maintenance of funds. To cement user longevity, the reasons and options provided should be expanded so that the user’s money never leaves this ecosystem.
“This allows Facebook to enable payment functionality in their apps without needing to become a bank.”
Livingston plays out a scenario of the coin project being implemented on the remittance platform in India via Whatsapp. In his example, he admits that one of the main reasons this platform will be used is due to the stablecoin factor,
“And a stablecoin allows money to move on the blockchain without the risk of it becoming more or less valuable than the local fiat currency.”
The Indian example of the use of the Facebook Coin following the three-pronged approach employed by WeChat rests on one main principle, the stablecoin factor. The Indian market may be remittance heavy and Whatsapp may be the most prominent messaging application in the country, but the backing of the US dollar is key to the adoption and more importantly, maintenance of this technology.
Livingston closed the example with a bold prospect,
“Just as WeChat replaced cash in China, Facebook could soon replace cash in India.”
The Kik Founder argued that since the Facebook Coin will be essentially tied to the US dollar, they are “just dollars that run on a blockchain.” He cited the evolution of the world economy, moving on from the Gold Standard when the value of a country’s currency was backed by gold, to a system where the reserve currency is the US dollar.
He closed with an open-ended question, stating,
“what will stop Facebook from doing the same?”
Countering The Claim
The prospect of a cryptocurrency backed by a social media giant, replacing a fiat currency like the US dollar, seems like a victory for the digital currency. However, the buck, or the coin, does not stop here. Livingston’s closing comments, including the closing header “The End of the Dollar,” are misleading.
Facebook’s cryptocurrency is one based on the US Dollar and backed by a basket of stablecoins, provable and universal collateral against risk. There is a fundamental reason why the social media giant is launching a coin backed by fiat, and not one that is “digitally-pure,” like most cryptocurrencies are.
Stablecoins are the fine line between fiat and cryptocurrencies, allowing the user to venture into the digital asset world and enjoy the benefits of ubiquity and universality of payments, while still tethering the risk to a government’s reserve. The Facebook Coin is playing that very line by allowing remittances, as Livingston’s example proves, while still maintaining their allegiance to the government’s currency.
The undeniable point here is this, the Facebook Coin would not be the Facebook Coin without the US dollar backing every unit.
The argument that Facebook Coin’s perceived victory over the US dollar is a collective victory for the cryptocurrency market is a false equivalence. Even if remittances from the United States are sent to India via Whatsapp, the reason people are reliant on the service is because of the backing of the US Dollar.
You simply cannot replace or claim to replace the foundation of your premise. Without the US dollar, the Facebook coin would never viably be pushed onto their messaging platforms and transform the payments realm. It would be chided away if it was digitally pegged to the company or to the decentralized computer network that Facebook claims would operate the coin.
Replace not Redefine
The prospect of the Facebook Coin celebrating the absence of digital money, and circumventing governments is a false paradigm. US dollars, or a basket of currencies merely being digitally represented and pivoted by a social media giant, do not concur with the fundamental principle of a “decentralized” currency.
Cryptocurrency proponents aim to replace the world’s currency with one that is logical rather than sovereign. Logical here refers to its mathematical precepts, rather than its medium, conclusion or basis. Yes, the Facebook Coin will be digital. Yes, the Facebook coin will be ubiquitous. Yes, the Facebook coin will be universal. However, it is not mathematically logical, as it still will be a reflection of the Dollar value.
Livingston’s hope of the Facebook Coin replacing the US dollar is one that looks at the fundamentals of the ends i.e. in product terms, the point of production and the point of consumption. The Facebook Coin is produced via technology and operated on a “blockchain,” one that pleases the ears of cryptocurrency enthusiasts. However, the point of consumption being digital completes the myopic argument of the overhaul. Resting the argument on the poles, while ignoring the balance of the dollar in between, is ignorance of the means for the ends.
The US Dollar is the essential body of the project, one that is masked by the thin veil of digitization, blockchain technology, and a cryptocurrency product, without actually being a decentralized currency.
Without the US Dollar, the Facebook Coin is nothing.
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