Dive Brief:
- Facebook is working on creating its own cryptocurrency, something the social network began researching about a year ago, sources told Cheddar. Until recently, corporate development team member Morgan Beller was the sole employee exploring how Facebook could use cryptocurrency.
- Last week, Facebook announced that David Marcus, the VP in charge of Messenger, would head up a new team of about a dozen employees that will explore how Facebook can “best leverage” blockchain. While that news wasn't specifically tied to cryptocurrency development, Cheddar's report suggests such development will be part of its mission. Marcus is the former president of PayPal, an early Bitcoin investor and member of the board for cryptocurrency exchange Coinbase.
- Facebook’s cryptocurrency plans could take several years to develop. The company isn’t planning to hold an initial coin offering, where the public can purchase a limited number of the cryptocurrency, sources told Cheddar. The company could acquire existing blockchain and cryptocurrency companies.
Dive Insight:
Facebook may be a little late to the game in exploring how it can leverage blockchain technology. Cryptocurrency and blockchain are on the radar of most major companies, and some are already putting the technology into practice. In March, it was reported that Google is developing blockchain-based technology to support its cloud business, which would allow third parties to post and verify transactions. Google may also offer a white-label version for other companies to run on their own servers. Additionally, Rakuten is planning a cryptocurrency for its loyalty program, pointing the potential to support transactional-based digital companies like major e-commerce players.
Facebook could allow users to use the virtual currency to make payments. The technology could support more secure transactions, which will be important as Facebook's various platforms become more transactional. The plan to develop its own cryptocurrency is one of several efforts by Facebook to improve security and privacy on the platform, after the social network has faced increased pressure from lawmakers, users and advertisers responding to the Cambridge Analytica scandal, where the data of nearly 80 million users was misused.
That Facebook is proceeding slowly with cryptocurrency make sense, given that this particular area of blockchain technology has had some challenges. In February, Marcus told CNBC that Messenger is unlikely to support cryptocurrencies anytime soon because, as a payment technology, they are expensive and slow. Stripe ended bitcoin payment support recently for similar reasons.
Facebook previously banned ads promoting cryptocurrencies on its platform in an effort to fight “cryptojacking,” or the fraudulent mining of cryptocurrency, which remains one of the major challenges with the virtual currency. Google has also had to deal with the issue, when its DoubleClick ads on YouTube were infected with malware that contained cryptocurrency mining software.
