Facebook's Coin. The SEC’s clarification around Ether and the evolution of crypto assets to become non-securities has allayed the fears of many and given established big businesses that have shunned ICOs a reason to start their own blockchain explorations.
Even before the guidance from the regulator, a report in May revealed that Facebook’s head of Messenger David Marcus was leaving his post to lead a team of about a dozen exploring blockchain applications for the company. While there hasn’t been any official reference to a Facebook cryptocurrency, Marcus was the former president of PayPal and an early adopter of cryptocurrencies who sits on the board of crypto exchange Coinbase.
Either Mark Zuckerberg wants to decentralize Facebook and give users back control of their data, which would undermine the company’s advertising model, or he wants to create the world’s largest micro economy within its 2+ billion user community.
Facebook has issued its own platform credits before, back in 2009, which were used to buy features in games like Farmville and other widgets but they didn’t gain any traction and were ditched shortly after. If it were to offer its own cryptocurrency it will be far more fungible than trading emojis and pet pigs.
“With a very established platform, I see them creating a utility token rather than a security token that wouldn’t be SEC regulated. I don’t think Facebook feels the need to raise equity, but rather sees it as a fantastic revenue stream going forward,” says Grant Fondo, partner in Goodwin's law firm in Silicon Valley and chair of its digital currencies practice.
“The SEC’s comments have cleared up a lot of uncertainty around the risk-reward for established companies and I can see a lot of big players jumping into the crypto space.”
How might a Facebook coin be offered?
The company could reverse ICO, where the company acquires another decentralized protocol in a token-buyout, swapping them for Facebook tokens and issuing them, or it could tokenize internally with its own ecosystem, maybe even rewarding loyal users with tokens for their content over the years.
“They could do an ICO," Fondo says. "A lot of companies are trying to go down the road of Reg A plus offering, but that is capped at $50m. Facebook would most likely do it as a regular IPO, they could do it as a dividend or some other equity offer, for example. I don’t think it would be exclusive to accredited investors but open to retail investors as well.”
What could a Facebook coin do?
The Amazon octopus may currently have more tentacles across different industries and supply chains, but Facebook has the advantage of having the most engaged (or addicted) citizens on earth and issuing its own currency is almost a natural step that could potentially mean they don’t have to leave that sphere.
It makes a lot of sense. Why advertise your events on Facebook and pay them a commission only to then sell the tickets through a third party who also clips the ticket? At the other end of the sale, those buying the tickets won’t be sorry to see EventBrite, TicketMaster or Mastercard removed from the equation — eliminating credit card and “handling” fees.
Hypothetically, the price of tickets could come down, customers would be more incentivized to buy more tickets with tokens they have earned on the platform, the circulation and value of FB coin would increase and a positive feedback loop begins.
Amazingly it hasn’t done so yet, but what if Facebook was to venture into the real world — like Amazon — and buy up some bricks and mortar chains where you walk into a store and deals and special offers are customized to your individual preferences based on the years of social, behavioural and consumer data that Facebook has on you.
With IoT technology, machines will be able to communicate with each other; cars with parking meters, mobile wallets with vending machines - they will be able to barter with each other and agree on prices based on supply and demand. There’s no point in a vending machine having a constant surplus of M&Ms selling at $2 when all the Reeses Pieces are flying out at the same price.
Towards a more universal token standard
“If the token was used for this purpose I think it would create a security token,” says Fondo. “It’s very hard to have a security token on your platform. If you’re trying to use those tokens on your platform it creates a lot of issues around selling them to people in different jurisdictions, where they will also be deemed securities and regulated in their own way.”
Although recent SEC comments provided a roadmap for a token not to be a security, could security tokens someday become as malleable and borderless as utility tokens through a universal token standard available to verified investors globally?
“I think very difficult to get countries to agree on unified securities protocol," says Fondo, "though it would be great to see that happen.”@BPI
