India is the world's top recipient of remittances with its diaspora sending $80 billion back home in 2018, and WhatsApp, an end-to-end encrypted messaging platform, is looking to target that market with a launch of cryptocurrency in the first half of 2019. The news hasn't come as much of a surprise as earlier last year too Facebook had spoken about incorporating Bitcoin into its products.
Remittance payments are a multi-billion dollar industry where NRIs send money back to their family members in their home country. India has a huge migrant population who can benefit from cryptocurrencies as unlike the legacy financial system, cryptocurrencies would make transfer of money easy and the remittance payers would spend less in fees to send their money.
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According to a Bloomberg report, Facebook is developing a digital currency pegged to the US Dollar. The digital currency will first be rolled out to the WhatsApp users in India (over 200 million), allowing them to send money to their friends and family members, both internationally and domestically. WhatsApp is not the only messaging platform planning to roll-out the cryptocurrencies. Signal and Telegram have also decided to release their own digital coins. However, unlike Bitcoin which is decentralised, the coins launched by WhatsApp and other messaging platforms will be centralised.
Facebook has already pulled in blockchain experts and according to NYTimes, Facebook could "succeed where cryptocurrency start-ups have failed by introducing mainstream consumers to the alternative world of digital coins." Cryptocurrencies have been in the news for over a decade but it hasn't been adopted by the masses owing to the complications associated with the mining process. With WhatsApp cryptocurrency, Facebook could change all that.
It won't be an easy ride though. WhatsApp hasn't been able to successfully launch its payment business- WhatsApp Pay - in India. WhatsApp Pay was launched in India last year in May and since then its roll out has been delayed over issues surrounding RBI's data localisation norms. Indian government is currently in the process of drafting crypto regulation. Earlier in April last year, RBI had issued circular banning banks from providing services to crypto businesses. However, some exchanges have found a new way around the banking problem by launching exchange-escrowed peer-to-peer services.
The government regulators could lay down the rules that Facebook might not like. It could be asked to scrutinize users, reverse fraudulent transactions and act in accordance with banking regulations just like any other payment network would. All this would require Facebook to have some amount of control over the transactions and doings of the third-party developers.
Despite the legal and privacy issues, the only company that can pull this off is Facebook. It has the reach and the money to turn this into a big deal - and collecting the chips from the billion dollars a year remittances should be more than the required motivation to do so.
Edited By: Udit Verma