The Bank of Facebook

Okay. Let’s create a new bank. “But”, you say, “You don’t have any customers, and it’ll be too costly to get them!”, “Well, let’s say I have the potential to attract 2.7 billion customers, would that work?”, “Yes, of course!”. “But, how would you get trust?”, “Well, I issue receipts for IOUs that you bank will pay, in whichever bank and/or currency that you want!”. “But, how can I trust that they will pay it?”, “I will put the money away somewhere, so you can get it back, but you can also transfer the IOU to someone else, if you want”, “Okay. Isn’t that just what we do just now with money?”, “Yes!”.

And so it is Facebook that is looking to use its captive base of 2.7 billion users — on Messenger, WhatsApp and Instagram — to launch its own cryptocurrency and become the Central Bank of Facebook. If successful, it could become the largest clearing bank in the world. Facebook, itself, sees competitors such as Telegram rising as a threat to its instant messenger platforms, and needs ways to innovate in the space and use its current captive user base to build new business models.

The FaceCoin

So, let’s give the new “currency” a name … FaceCoin.

And how would it be able to get users on its side, and become trustworthy as a bank? Well, it is likely that Facebook will peg the value of FaceCoin to a range of fiat currencies, and then…