Join thousands of others who receive this daily analysis of crypto markets & news in their inbox every morning - subscribe now.
Never underestimate Mark Zuckerberg.
News broke yesterday that Facebook is building a stablecoin that will be launched to allow WhatsApp users in India to transfer money. Of course, the immediate reaction of the internet was to start yelling. Many people were excited, others were upset about the company’s recent privacy issues, and some felt that a Facebook stablecoin didn’t fit the authentic ethos of the crypto industry.
All of these reactions missed the mark though.
Zuck and the team at Facebook have never been interested in playing it safe. The highly talented team consistently looks to invent and/or grow products that change the world. If Facebook is building a stablecoin for WhatsApp, this is less about crypto and more about building a globally dominant product that changes the way billions of people live their lives.
India is a unique choice to start with because they are the world’s largest receiver of remittances globally, with ~$70 billion flowing into the country and accounting for 4% of total GDP. This is more than 12% of the total addressable remittance market. The country is also home to more than 200 million WhatsApp users. In fact, most users have abandoned traditional SMS messaging and use WhatsApp exclusively. Lastly, payment applications like Venmo, Square Cash, Apple Pay, and others don’t work internationally, which leaves the door open for someone to beat the existing payment applications to the punch.
The current administration in India has created a perfect storm for this product to be well received as well. In 2016, the Reserve Bank of India voided the 500 and 1,000 rupee banknotes by announcing a surprise demonetization plan. This led to over 99% of those notes being deposited into banks and a significant blow was delivered to the previously cash dependent society. Additionally, the government has been increasingly tough on cryptocurrencies.
They have considered a ban on the use of the digital assets, while also outlawing legacy financial institutions from servicing any companies related to the crypto industry. These attempts at overreaching capital controls have been met with strong dissent from many Indian citizens who desire to participate in a more open, global financial system.
The southeast Asian country has a large population, significant smartphone adoption, and a regulatory environment that leads people to be interested in cryptocurrencies. Facebook realizes this could be a company defining opportunity and it has some of its most talented people working to make this effort successful.
David Marcus leads the blockchain team and is the former President of PayPal. Kevin Weil is the VP of Blockchain Product, previously served as the VP of Product at Instagram, and was once the SVP of Product at Twitter. Evan Cheng is the Director of Blockchain Engineering and was a former senior manager at Apple. And finally, Morgan Beller is the unsung hero of the group — the woman who leads blockchain strategy, but worked solo on the project for a period of time before she was able to build internal support and recruit some of the company’s best talent.
Couple these individuals with Facebook’s notorious Growth team and you have a recipe for success. The Growth team is the company’s secret weapon. They are brought in like a SWAT team to solve the hardest problems by leveraging immense amounts of data and the proprietary analytical tools that have been built over the years. This team has helped four separate Facebook product teams scale their offerings to over a billion users each (Facebook main app, Messenger, Instagram, WhatsApp).
So what exactly is the potential for this team?
The holy grail would be to build the world’s dominant payment system. This would be a direct competitor to Visa and Mastercard, but it is more likely to happen than you may think. Facebook has billions of users and tens of millions of merchants. This gives the company a leg up on competitors as they bootstrap the network effects needed to lock in both sides of a marketplace.
If the technology company could successfully build the product and drive adoption, they will have a chance to transition from a social network to one of the largest financial services companies in the world. This move would allow them to take a small percentage on each transaction and reduce the dependency on their advertising-based model.
This won’t happen overnight though. Facebook needs to (1) create a viable stablecoin, (2) launch the product in India’s large market, (3) drive sustainable adoption, (4) expand to other jurisdictions and other digital currencies, and then (5) build out additional financial services to serve their customers. Don’t look now but it wouldn’t be surprising to see Facebook back their way into becoming a new-age bank for digital natives outside the United States.
As I’ve said numerous times before, Facebook is the most important company in crypto. They have 2+ billion people who use their services daily. Anything they launch will quickly become the most popular product in the industry….maybe even one of the most popular products in the world.
Mark Zuckerberg has dedicated his life to changing the world. Get your popcorn ready — I wouldn’t bet against this team.
The “Off The Chain” podcast has been downloaded 300,000+ times in 160 countries. You can listen to the latest episode with Ari Paul, CIO of Blocktower now: Click here for Off The Chain podcast
Peter Thiel Backs $2.1 Million Round for Crypto Investment Startup Layer1: PayPal co-founder and noted venture capitalist Peter Thiel has backed a $2.1 million seed round for crypto investment startup Layer1. Other investors in the round include Digital Currency Group, institutional investor Jeffrey Tarrant and more. Layer1 is a crypto investment and engineering infrastructure platform. However, it also acts as a kind of tech-focused fund in that it backs “promising” blockchain protocols and then builds technology to support their growth. The firm takes a particular focus on “programmable money and store-of-value applications,” which it sees as having the most potential for value creation. Read more.
Coinbase to Pay Users to Try Crypto Assets: How do you get people to try out cryptocurrency when the market is in a prolonged slump? You can try giving it away. That’s what the makers of a little known digital currency, known as ZRX, are doing. In an initiative announced on Wednesday, users of the popular crypto exchange Coinbase can earn a few tokens of ZRX by watching videos and taking quizzes. Read more.
More Staff Cuts Are Coming at Ethereum Studio ConsenSys: More layoffs are coming to ConsenSys, the Ethereum-focused startup incubator and blockchain technology conglomerate. According to sources at the company, ConsenSys is quickly spinning out startups that it previously supported, which will drastically impact its workforce and leave an uncertain fate for one of the blockchain world’s most ambitious and well-funded startups. Read more.
Wall Street’s Biggest Bitcoin Forecaster Gives Up Forecasting Bitcoin: For a sense of how tough 2018 has been for Bitcoin forecasters, look no further than Tom Lee’s latest cryptocurrency research report. “We are tired of people asking us about target prices,” the co-founder of Fundstrat Global Advisors wrote in an emailed note to clients on Dec. 13. He continued: “Because of the inherent volatility in crypto, we will cease to provide any timeframes for the realization of fair value.” In other words, Wall Street’s most prominent Bitcoin forecaster has given up forecasting Bitcoin. Read more.
Token Startup Templum Seeks SEC Clarity on Post-Trade Activities: Regulated token trader Templum wants to clarify how digital assets tracked or tokenized on a blockchain might fit within U.S. securities regulations. To that end, the company filed a rulemaking petition to the U.S. Securities and Exchange Commission last week, in which the firm outlined how crypto assets and blockchain technology may be leveraged in certain forms of securities transactions. The company is asking for clarity on how these nascent technologies fit into current regulatory schemes, said Templum co-founder and CEO Vince Molinari. “It doesn’t really exist in its current framework, at least in our opinion,” he said. Read more.
If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.
Nothing in this email is intended to serve as financial advice. Do your own research.