Caitlin Long, a Wall Street veteran and blockchain evangelist, has given her take on the upcoming Facebook cryptocurrency, and it makes for interesting reading. Writing in Forbes, Long offers six predictions on what the coin will do and the impact it will have on the crypto sphere, and the wider financial markets, which we have summarized here.
1 – Focus on developing countries
Long believes that Facebook will succeed where traditional banks have failed and will provide citizens of developing nations with access to a currency or store-of-value more reliable than existing government-backed currencies. Facebook’s cryptocurrency will indirectly exert fiscal and monetary discipline on developing nations, which will improve the lives of a large number of people globally.
2 – Interest paid to holders
Long suggests that Facebook will offer interest to users of its cryptocurrency, not out of any desire to benefit them but because they will earn vast amounts of interest by holding the fiat reserves that back up the token. If they didn’t pass on this interest to holders, Long states, then there will be an almighty fuss about how much Facebook is making from the project. The figures Long suggests are $235 million in interest for every $10 billion they hold. If they don’t share these earnings, Long believes the issue will quickly turn into a “hot potato for Facebook politically”.
3 – A Facebook foundation will increase the company’s power
Facebook plans to hand governance control of its project over to an independent foundation it recently formed in Switzerland. Long argues that this increases the perception of trust in the project and also offers Facebook an argument against accusations of complete centralization. This foundation will balance the basket of fiat currencies that is used to keep Facebook’s coin stable, which could ultimately give them a huge influence over the markets.
4 – The crypto/securities debate will hot up
Given the recent actions taken by the Securities and Exchange Commission against Kin, Long says it will be interesting to see how they will view Facebook’s token. If it is a security, then will all holders have to be accredited investors to use it? And if it’s not, then why is it different to all the others? This will certainly be an interesting one.
5 – Facebook’s data honeypot
Given that any users of Facebook’s token will have to pass anti-money laundering/know your customer checks, Long feels we will get a clear idea of how many of Facebook’s reported 2.3 billion users are real. But this is just the tip of the iceberg – Facebook will be generating “a huge honeypot of data about how users spend money”, with every single transaction traceable by governments. This will bring up all sorts of discussions on data privacy and who has the right to access it.
6 – Facebook’s coin will benefit Bitcoin
Long’s final suggestion is that “Facebook’s foray into cryptocurrency will end up benefiting Bitcoin.” Facebook’s token, she says, will not only open up new markets to the concept of cryptocurrency, but it will help legitimize it at a time when many still vilify it as the preserve of criminals and tax avoiders. If billions of people begin to use it every day it will become commonplace, which will lead the masses towards other cryptocurrencies, with Bitcoin being seen as the principal exponent of the genre. This could, in turn, help legitimize Bitcoin and increase its usage and its value.
Grab the Popcorn
We’ll see how Long’s predictions play out, but one thing’s for sure – it’s going to be an interesting ride!