With Facebook’s reportedly planning to test its virtual currency codenamed Libra, it is likely that the move will lend legitimacy to use of digital currency in the country. But the fluid regulatory situation with regards to cryptocurrency has cast doubt about the efficacy of such a plan.
Last week Bloomberg reported that Facebook is building Stablecoin, a cryptocurrency pegged to the US dollar or a basket of currencies, making it less prone to swings in price. The product could eventually allow users to transfer money for remittances via WhatsApp through Stablecoin. India, given its expanse, has been chosen as the testing ground for the product.
The social media giant has, so far, chosen not to comment on the reports.
Anyway, given the size of the company, this was enough to cause a flutter in the relevant circles.
Facebook is expected to allow peer-to-peer transaction of its cryptocurrency and the proposed currency system would not require to use banks to transfer money to buy or sell digital currency, a report in ET said quoting leaders in cryptocurrency startups.
The foray shall not be aided by the regulatory policies in the country which continue to be ambiguous. In April 2018, the Reserve Bank of India had banned entities from providing services in virtual currencies to any individual or business.
Companies represented by the Internet and Mobile Association of India are fighting a case in the Supreme Court against the regulator’s ban. The next hearing on this case is scheduled in the second week of July. The court had also directed the government to come out with its own set of policies.
However, there is no law in the country which prevents users within a platform from exchanging digital tokens. Facebook is likely to initially operate within the ambit of this rule.
Nitin Sharma, founder of Incrypt Blockchain, has been quoted as saying that for the Facebook project to be deployed on a large scale in India, regulatory approval may eventually be a major impediment. Facebook will be faced with challenges of making the link between the crypto Stablecoin and rupee to be real to derive any value for its users.
Not everyone at the forefront of fighting for pro-cryptocurrency regulation in the country is, however, enthusiastic about Facebook’s plans. The fact that the company shall deploy a centralised approach by allowing transactions only within its various platforms, defeats the purpose altogether, said a bitcoin trader.
These are still the early days for Facebook. Moving beyond traditional payments to add blockchain-based Stablecoin transfers would represent a huge shift for the company. There is still no clarity about the wider rollout of the cryptocurrency by the company and hence it needs to be treated with caution.