Real talk: wtf is corporate crypto?
Why all the last week’s fuss about Facebook’s Project Libra? Triggered by wider concerns about big firms becoming adepts to their first corporate crypto, the trend is obvious: the likes of JP Morgan and Nike are stretching the private money issuing muscle. Seemingly odd on the surface, the process is quite organic, if you look at it from the socio-economic perspective.
The economic background
Against the backdrop of post-industrial transition with its four major types of economy players — Netocracy, Corporations, Financial Aristocracy, Consumers — corporations have emerged to be fighting with governments for decades over independence in all respects — from tax evasion to pursuing their own political stance. Trumpism is the most vivid example of the latter elevated to the national degree: the mogul at the Oval office is now dictating both in-state and international course coming solely from his private interest (hence Russian oligarch-liaison allegations). Are we now coming closer to the classic post-industrial premise of ‘corporations destroying the state’? If so, it’s only logic that the strongest pillar of a sovereign state — its monetary system — comes under attack first. To win this battle, facebooks of today first need to eliminate government-issued money from their business cycles, and start to use their own money instead (at least partially). And this will be the sort of money they have all the powers of: forget inflation and monetary issue concerns — corporate money’s real value is to be controlled by the Board of Directors. Bye, good old treasuries and ministers of finance, we don’t need you anymore.
Why Facebook though?
With all this in mind, FB jumping on crypto bandwagon doesn’t seem like a hype-driven last resort anymore. Chill, crypto anarchists — it’s not Bitcoin that ‘ZuckBucks’ is competing with. Local fiat currencies and government-regulated stable coins are its true target. What are the odds? Starting off with easy target emerging economies like India under a noble intention to perform cross-border transactions and make remittances more efficient, Facebook money driven by enormous user base and solid partner support already in place is far ahead of local fintech and p2p crypto rivals like Telegram with its TRON coin. Leave the KYC / hacking concerns behind, who won’t be tempted by bonus loyalty tokens and 2% lowered transaction fees as compared to conventional payment networks?
Some minor technical concerns: operating on a global scale, a FB-coin can’t be pegged to each and every currency in the world, and would require respective 24/7 support and partners network — a task hardly plausible even for such a monster of a network. Deposits and withdrawals need a bunch of partnerships with crypto exchanges as well. On a positive side, introduction of a token looks like some sort of attempt to align advertising incentives within the network both on the merchant and user side. What a nice pivot indeed: people get compensated for the attention span spent on ads impressions, thus addressing Facebook’s major turn-off as criticized by the public — using personal data to feed the ads-machine. Is this system poised to be effective?
Banks’ own private crypto
Banks use case appears to be more prosaic, however not necessarily without the ‘Big Brother’ ambition entirely. Serving as mere digital versions of existing fiat, JP Morgan claims to be trying to simplify cross-border payments and faster settlements advocating for trust and system stability. The move is obviously a dig at Ripple tech already in place at a number of banking institutions worldwide.
Following in JPM’s footsteps is a cohort of other banks — from Japan to Indonesia — with a practical goal to leverage DLT to speed up and cut down the international banking fees. Sitting on top of that are the perks of making payments at cafes and grocery stores, and transferring the coin seamlessly to other bank clients from an app, which in fact doesn’t really need the crypto influx per se. Will fiat-backed stable coin with collateral kept in public treasury and heavily regulated by governments serve any other purpose? Very unlikely.
When McDonalds coin?
Plotting their foray into corporate crypto game are many more firms from very diverse industries. Nike is the latest example with its Cryptokicks that is to foster an entirely new ecosystem for sneakerheads to hang out online sending cash / crypto to one another at online marketplace, blog, or sell the kicks that fell through. Oh, and there’s a crypto wallet too! A smart marketing stunt, no less, and a great way to eliminate state-issued USD from operation.
This is not investment advice
As Fortune 500’s giants are exploring the field testing out the use cases and perks for their monetary aggregators, one thing to keep in mind is that it’s their revenue concerns that made them do it in the first place. Whether it is a classic Web2 ad-driven model, or newly launched retailer’s strategy aimed at having a bite of crypto, the user / the client is not at the core of the equation. At the end of the ady, it’s all about maintaining Big Tech’s classic business model — boosting time spent on the platform to level up user interaction volume. The takeaway? I’d rather not invest, unless I’m on the company’s Board, of course.