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Will Facebook's digital currency give legitimacy to Indian crypto-startups?

Indian crypto-enthusiasts are hoping that the entry of a large player like Facebook will lend legitimacy to the technology and in turn be able to convince central bank to extend banking services to crypto start-ups

twitter-logo BusinessToday.In        Last Updated: June 6, 2019  | 16:04 IST
Will Facebook's digital currency give legitimacy to Indian crypto-startups?
Facebook is building a cryptocurrency system

Indian cryptocurrency community is hopeful that Modi 2.0 will change its previously held unfavourable stance on cryptocurrencies after reports emerged that Facebook, one of the 5 biggest names in the tech world, is all set to unveil its long-rumoured digital currency this month. Last year in April, RBI had issued a notification stopping banks in the country from providing financial services to crypto exchanges. Now, the Indian crypto-enthusiasts are hoping that the entry of a large player like Facebook will lend legitimacy to the technology and in turn be able to convince central bank to extend banking services to crypto start-ups.

"Anything like this which displays the usage of the technology by a legitimate player like Facebook or WhatsApp will bring a positive approach for the users," said RupeeCoin, a startup that looks at offering rupee-equivalent blockchain-based digital currency.

Cryptocurrencies have been in the news for over a decade but has faced regulatory complications. With Facebook owned cryptocurrency, things in India could change real fast. Facebook had long been exploring the prospects with blockchain and was looking to diversify into fintech. Facebook is already looking to partner with banks around the world that will enable it to change international currencies into its digital coins. However, in India, Facebook is expected to use peer-to-peer channel, allowing buyers and sellers to deal with each other directly, as banking services are blocked for crypto trading.

Earlier in 2018, Facebook hired former PayPal president David Marcus to build an asset-backed cryptocurrency, which, according to reports, will be called GlobalCoin. Marcus was also staffing up his blockchain team at Facebook to fast-track the launch of the cryptocurrency for online payments. According to a report by The Information, Facebook's digital currency will function as borderless currency and with no transaction fees attached to it.  The report highlights the importance of such currencies for developing nations where the government backed currencies are typically volatile due to heightened uncertainty.

Facebook is extremely serious about its new venture despite the unwillingness of the people to trust the company with their finances. Facebook has already offered to pay salaries to its employees in the form of cryptocurrency. The Mark Zuckerberg led company is also planning to have physical sites or ATM-like machines for users to purchase the cryptocurrencies. The cryptocurrency will also be designed to function within the company's existing messaging infrastructure that includes WhatsApp, Messenger and Instagram.

Earlier in 2019, Facebook acquired four people behind the blockchain startup, Chainspace. The company had posted on its website, declaring that the team is "moving on to something new."

Meanwhile, according to a BBC report, Facebook is planning to set up a digital payments system in about a dozen countries by the first quarter of 2020. Nicknamed Project Libra, Facebook's plans for a digital currency network were first reported last December.

Edited By: Udit Verma

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