Facebook will debut a cryptocurrency called GlobalCoin on June 18th. That’s sooner than earlier reports, which indicated that GlobalCoin would drop in 2020.
GlobalCoin will be a stablecoin that will be tied to not only the US dollar but also several other fiat currencies and low risk assets. This means that people who use GlobalCoin won’t have to worry about prices changing overnight. In addition to being more stable, GlobalCoin will also be easier to use compared to Bitcoin. Facebook users will be able to use Facebook Messenger to send GlobalCoin to payments each other.
According to TechCrunch, GlobalCoin users won’t have to pay any transaction fees, either. That alone could prove to be revolutionary, since it would mean that anyone in the world could send money to someone else for free through Facebook.
The fee for sending fiat payments across national borders averages 6.7%, according to The World Bank. Normally, it only costs around 30 cents to send a Bitcoin payment. However, fees spiked all the way up to $37 in late 2017 and early 2018.
GlobalCoin’s impressive features– along with the fact that Facebook has over two billion monthly active users— have left many wondering: what will happen to Bitcoin once GlobalCoin hits the market?
A “Bitcoin-beating” cryptocurrency?
Last Wednesday, The Information obtained inside information from several people involved with GlobalCoin. While the focus of The Information‘s report highlighted how Facebook intends to task an independent foundation with managing GlobalCoin, Forbes writer Billy Bambrough took the story in a negative direction by suggesting that Facebook appears to be interested in “supplanting Bitcoin.”
None of the anonymous individuals that provided the information about GlobalCoin to The Information mentioned that Facebook has overt plans to make Bitcoin obsolete. However, it’s easy to see how one could draw that conclusion. Bitcoin’s historic volatility and the Bitcoin network’s high fees during trading frenzies are two of its major stumbling blocks. GlobalCoin doesn’t have either of those problems.
News that GlobalCoin is set to debut earlier than expected didn’t have much of an effect on Bitcoin markets. Prices dropped to $3,000 USD earlier this year. However, positive news regarding regulation, the escalating trade war between the US and China and a variety of other factors have helped push prices past the $8,000 mark again.
The other side of the coin
The way that Bitcoin self-regulates its supply sets it apart from GlobalCoin. The number of bitcoins generated per block is set to decrease at a steady rate. Every 210,000 blocks, there’s a 50% block generation reduction. This is why Bitcoin is more like gold than a true currency. GlobalCoin will likely have more in common with cash.
If cash and gold can exist side-by-side, why can’t Bitcoin and GlobalCoin? There may be room for both.
Spencer Bogart of Blockchain Capital has an optimistic view of GlobalCoin. He believes that GlobalCoin purchasers will use Facebook’s cryptocoin as a stepping stone to invest in Bitcoin, Ether and other cryptocurrencies.
In an interview with Bloomberg, Bogart said that GlobalCoin will lead to a “doubling or tripling of crypto [users] over the next couple of years.” He went on to say that GlobalCoin has already inspired fintech and financial companies to invest in blockchain.
Can GlobalCoin and Bitcoin coexist?
CoinTracking reached out to cryptocurrency, fintech and information technology thought leaders to find out what they think about GlobalCoin. Here are their comments.
“GlobalCoin is yet another attempt by Facebook to move into the financial world. Most people probably don’t realise, but Facebook has had a number of attempts at breaking into the payments/finance world already. So far all their attempts have failed. In 2011 Facebook launched Facebook Credits to be used to pay for all virtual goods in games. This was later shut down in 2012 and they converted all value back into their customers local currencies. Following this in 2017, Facebook Messenger Payments was introduced to allow Facebook users to send payments to family and friends. The service is now due to shut down on 15th June 2019, with Facebook citing poor uptake from consumers. Facebook’s history aside, the comparison between their stable coin and Bitcoin is ridiculous, and pinning it as radical Bitcoin-beating cryptocurrency is just absurd. They are simply jumping on the crypto and stable coin band wagon to try and help slingshot a product they have been trying to crack for the last 8 years.”
– CoinCorner CEO Danny Scott
“Mass adoption of cryptocurrency – that is what Libra will bring even if Facebook may not be the party we want bringing it. It will open the pathway to Bitcoin for the masses.”
– Morvareed Salehpour, Esq., attorney and managing partner at Salehpour Legal Consulting
“I believe it [GlobalCoin] will be a P2P payment platform that may have some regulatory risk. The more their coin represents a dollar, the more it will be regulated as money. If it is not seen as pegged to the dollar, it may have a chance to serve many currently underserved markets. In any case, it’s more of a threat to PayPal, Venmo, Stripe, etc. No threat to bitcoin or ether. ”
– Futurist and researcher David Siegel, Cutting Through the Noise
“There is no way Facebook’s GlobalCoin will kill Bitcoin. Buying drugs and child pornography, laundering money, evading taxes – this is what people who actually use crypto use it for. A very small percentage of actual crypto usage is for legitimate transactions, which is hugely important for Facebook’s new coin. Why? Because nobody trusts Facebook! I’m sure Facebook will claim their coins are 100% secure and that they have no way of tracking them, but that’s like the scorpion assuring the frog it won’t sting it as they cross the river. We all know Facebook is always lying through their teeth about data privacy and security.”
– Dary Merckens, CTO at Gunner Technology
“GlobalCoin is a boost for the cryptocurrency sector, as it brings to the mainstream its use as a medium of exchange. While bitcoin remains an excellent store of value, bitcoin (as well as most other cryptocurrencies used on public blockchains) are not ideal to be used as a medium of exchange. Key attributes of a medium of exchange are that it is widely accepted and relatively stable in value. As Facebook has 2.4 billion monthly average users (as of the first quarter of 2019,) and GlobalCoin is reported to be tied to the US dollar, it has the immediate opportunity to fulfill this use case. While the Facebook payment system is an in-network permissioned blockchain that does not fulfill the “Satoshi vision” of an open un-censorable public blockchain free from government control, the launch of GlobalCoin may nonetheless be looked upon as an “iPhone moment,” just when Steve Jobs showed us in early 2007 a prototype of the smartphone as we know it today – an event which transformed the technology industry.”
– Steven Eliscu, EVP of Corporate Development at DMG Blockchain
“GlobalCoin should be a net positive for cryptocurrencies like Bitcoin, Ethereum or Zcash, as it won’t be able to compete on the same dimensions of decentralization or privacy. With over 2 billion users, Facebook has the potential to be by far the largest on-ramp of new crypto users to date. Globalcoin is the biggest threat for digital assets that are aiming to mainly be used as bridge currencies (i.e. Stellar, Ripple) or existing centralized stablecoins (USDC, Gemini USD). I think this is huge news for the industry and a great way to drive meaningful adoption. I think about Globalcoin as comparable to a massive sovereign nation issuing its own currency for the first time. Facebook is more like an economy than a business and currency is a natural evolution of an economy.”
– David Siemer, CEO at Wave Financial
“I think that this currency may actually help Bitcoin in the long run. This is because it will introduce so many newcomers to the idea of cryptos. While GlobalCoin looks interesting, the wider use of Bitcoin means that people may turn to this currency instead, once they feel comfortable with the concept of digital money.”
– Phillip Konchar, Head Tutor at My Trading Skills
“GlobalCoin and Bitcoin are targeting two different markets. Bitcoin, from its inception sought to be an inflation hedge that was not tied to sovereign nation currencies which countries manipulate to achieve various national goals. GlobalCoin seeks to be a transaction currency for everyday use. Therefore, it is important that it be linked closely with popular currencies to keep prices level.”
– Jeffery Stollman, Principal Consultant / Thought Leader / Polymath at Rocky Mountain Technical Marketing
“I believe Facebook’s entry into crypto will only have a positive effect on the market. It serves as a proof of concept for Fortune 500 companies and is a sign that they are beginning to issue digital assets and enter the marketplace.”
– Kyle Asman, partner at BX3 Capital
“If anything, Facebook’s GlobalCoin will promote more education and crypto adoption, and Bitcoin will benefit from the boost while some lesser-known coins may suffer as a result. However, I think it’s great that another large corporation is seeing value in blockchain technology and cryptocurrency as a whole. Whether it’s Facebook, Amazon, or JP Morgan, they are all finally coming to terms with the fact that cryptocurrency is here to stay and Bitcoin still wears the crown. The rest are just contenders until they prove their worth.”
– Eric Brown, Founder and CEO of Aliant Payments
“GlobalCoin will have a positive effect on the cryptocurrency industry. Facebook’s widespread popularity and authority over how we live our digital lives will ultimately educate the masses. As more and more people learn how cryptocurrency and blockchain works, the market will become more stable. Companies large and small will begin to trust and adopt the technology, and, as a result, there will be more concrete applications for cryptocurrencies. No matter how many people buy into GlobalCoin, it will pull new users into other currencies as well, like BTC and Ethereum.”
– Ian Cogswell, consultant at Pelicoin
“Bitcoin uses proof-of-work. In theory, anyone can mine and reap the rewards. Libra, on the other hand, is a closed consensus model, where some huge partners (Mastercard, etc.) are the ones validating transactions. They are really two different beasts. Facebook’s offering is much closer to a PayPal (with crypto/blockchain features) than Bitcoin.”
– Erik Johnson, blockchain software developer and co-creator at Cache.gg
What kind of impact do you think GlobalCoin will have on crypto markets? Let us know your thoughts in the comments section below.
CoinTracking can help with your crypto taxes by:
- Importing your trades from 110+ exchanges/wallets.
- Supporting DEX, BSC, and Binance Chain trades.
- Powering 25+ advanced reports.
- Calculating Gains automatically, according to 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB).
- Generating fully compliant Tax Reports worldwide.
Sign-up to CoinTracking today!
If you need personalized help reviewing your transactions or preparing your US tax returns, check out our CoinTracking Full Service. CT Full Service is provided by a team of crypto tax professionals led by Sharon Yip, an expert CPA. Follow our weekly AMAs on Twitter where Sharon Yip answers your crypto tax questions.
Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.