Facebook crypto likened to PayPal on blockchain

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Daniel Webber
Daniel Webber
Founder & CEO
Daniel is Founder and CEO at FXcompared and has numerous years of experience in the international finance world, especially within the media, technology and property sectors. Daniel is passionate… Read more
  • Critics say that Facebook’s payments processing product is just like PayPal, the only difference is it will be operating on a blockchain platform
  • Messaging apps Signal and Telegram are reportedly working on their own crypto coins
  • Facebook’s interest in cryptocurrency will likely give the crypto market a boost, observers note


Social networking giant Facebook will be rolling out its digital token soon and reports say that would-be users will be able to transfer money internationally at affordable overseas transfer rates within the year. While this is a welcome development and an indication of the industry’s future, critics believe that Facebook’s cryptocurrency is just PayPal with a twist.

Insiders say that Facebook’s stable coin can eliminate some of the problems that blockchain faced in 2017, the most prominent of which is volatility. Volatility, according to experts, can be averted if FB’s stable coin is backed by real money. However, pegging stable coin to a particular currency will result in a banking arm for FB. Nicholas Weaver, a computer science expert at University of California at Berkeley has said that integrating a payments feature on an app and referring to it as a blockchain system “is just marketing fluff”.

"It's going to be really a centralized database they control, so what they are really doing is building a private-label PayPal”, added Weaver.

Attack of the 50-Foot Blockchain author David Gerard agrees. “Nothing Facebook is doing in the payments space requires a blockchain - except for possible publicity advantages”, he said.

According to a recent report published by The New York Times, Facebook has been holding talks with crypto exchanges. It is also noted that the token will be a feature on the messaging app WhatsApp, a company that Facebook bought years ago.

News about Facebook’s payments platform came out in December last year through a Bloomberg report. Rumours about the project have been making the rounds online before that.

Facebook’s crypto will not be the only new player in town though as messaging apps Signal and Telegram are reportedly working on their own digital tokens too. Cryptos from these brands will be launched this year.

The cryptocurrency market is rejoicing about these developments. Since it lost $700 million in 2018, the sector needs the attention. The interest of big name brands is the only good news in the cryptocurrency industry, observers say. The sector is still dealing with regulatory concerns apart from reeling from a year-long bear market.

The social networking giant’s interest in digital tokens in general is notable, said Cornell University’s computer scientist Emin Gun Sirer. He explained this week that many companies are interested in the technology but added that these types of companies treat crypto as “nothing more than a vehicle to untap the ultimate goal of raising money”.

"But some big companies, such as Facebook, actually get the gist of cryptocurrencies and are striving to build truly decentralised systems that aren't just fundraising vehicles and not under corporate control”, he added.

Larger players are expected to start using blockchain soon. Sirer told reporters that this will happen as soon as “big companies realise the potential advantages blockchains offer”. Payments leader MasterCard has already realised this potential but maintains that the technology has other uses.

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