The Real Reason Facebook Banned Cryptocurrency

facebook ban bitcoin
Facebook may be looking at creating its cryptocurrency as a mean to control transactions done on its platform.

Facebook VS. Bitcoin?

On January 30th, Facebook introduced new ad policies banning campaigns associated with binary options, initial coin offerings, and cryptocurrency setting the stage for possibly developing a coin of their own. However, this recent change in policy could be more of a response to the growing pressure it’s feeling from regulators and government agencies. At the end of October 2017, Facebook testified to Congress about allowing fake news to run rampant on its platform bringing to light obvious areas of neglect and apathy. They were also hit with a federal lawsuit after the NY Times and ProPublica concluded Facebook was discriminating against its older users.

Facebook’s Potential Decentralized Future

There are a number of reasons why Facebook would use cryptocurrency and blockchain technology to further their best interests. At a bare minimum, Facebook could create their own currency and award it to those who create content on their platform. It could be used as an incentive to sign up for certain offerings such as webinars or other advertised content. Users could also receive credit in Facebook’s currency which can be used to fund advertisement campaigns. Still, there’s reason to believe that financial gain is just the tip of the iceberg.

With Facebook being actively involved with a wide range of aspects in life, the social network may see cryptocurrencies as a way to take more control of their brand. They can essentially insource each step of the business process while still maintaining an image of “transparency” and “innovation.” This leads to the theory that perhaps Facebook is just appearing intrigued with blockchain technology to stay in the loop. Senior Analyst at Investing.com, Clement Thibault told Futurism that he’s confident Zuckerberg’s message on cryptocurrencies is [in] part legitimate interest in a new technology and [partly] just throwing Facebook’s brand in a sentence with cryptocurrencies to show users and investors that Facebook is not behind the curve on innovation.

The social network is already somewhat keen on decentralized business models. Facebook’s Indian-based messaging app, WhatsApp, just started allowing P2P payment options. Considering that India is a much smaller market, Facebook may be testing the waters with WhatsApp while looking forward to even bigger endeavors.

How Could Zuck Turn his Back on Blockchain?

From the outside looking in, the ban of cryptocurrency was a peculiar move. But a month ago Facebook CEO, Mark Zuckerberg, praised cryptocurrency and pledged to continue researching the subject. Zuckerberg said in his “new year focus” post that,

There are important counter-trends to this –like encryption and cryptocurrency — that take power from centralized systems and put it back into people’s hands…I’m interested to go deeper and study the positive and negative aspects of these technologies, and how best to use them in our services.

Two members of Facebook’s board of directors, Mark Andreessen and Peter Thiel, are known cryptoinvestors. The Wall Street Journal reported that Thiel has invested up to $20 million in cryptocurrencies since the middle of 2017. Moreover, head of Facebook Messenger, David Markus, is on the board of directors with popular crypto exchange; Coinbase. However, Markus told CNBC that integrating cryptocurrency with Facebook would be “very expensive [and] super slow.” Once these issues get worked out, they may revisit the various crypto communities for potential payment options on their platform.

From an economic standpoint, this ban will greatly reduce ad revenue for Facebook. The ICO industry broke records in 2017 generating virtually $3 billion in total. Last year was also an amazing time for Bitcoin advocates as the coin hit all-time highs peaking at nearly $20,000. With Facebook already making announcements to downsize, this ban seems like a major loss for the social network. However, it’s probably an even bigger blow for crypto platforms. Since the announcement, Bitcoin’s value has dropped nearly $4,000.

 

Facebook’s Decentralized Rival: Telegram

The encrypted messaging app with nearly 200 million users, Telegram, is preparing an ICO with experts reporting it to surpass $1.2 billion possibly making it the largest ICO in history. Telegram is creating its own blockchain technology and native currency called the “gram” that can be used in its chat app. Even though Telegram can’t touch Facebook as of now, they could become competitors later down the line. Facebook may choose to invest in Telegram or adopt a similar model on their platform to stay relevant.

Although it’s likely that Facebook will launch its own crypto in the future, now is just not a good time. The best thing they can do is to distant themselves from anything even remotely sketchy to avoid further scrutiny.

In the meantime, Facebook’s team will continue to study implications of blockchain, encryption, and cryptocurrency on its network. They will probably join the growing list of vendors accepting cryptocurrencies as an exchange method such as Square Cash, Robinhood and coming soon; RushPRNews!

Facebook is being strategic but it’s too soon to determine that they are cooking up their own crypto as of yet. Either way, Facebook is going to have to integrate related methods into their network soon to continue riding the never-ending wave of cryptonomics.


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