Facebook expanding cryptocurrency development efforts

  • By Tom Cleveland

  • February 9, 2019
  • 2:53 am BST

Facebook, the world’s largest social media network, has taken another step toward expanding its presence in the blockchain and cryptocurrency space. News today is that it has acquired the development team behind a London-based startup, Chainspace, which was founded by a group of researchers from University College London. Facebook also noted that it had not acquired any technology with the deal, just development personnel, a practice common in nascent industries where established companies acquire proven staff through acquisition, rather than through a traditional one-on-one hiring process.

As it turns out, Facebook has already begun the reorganization process by transferring four of the five individuals that helped write the startup’s whitepaper from Chainspace to its internal blockchain development team. The social media giant has been very close-mouthed regarding its plans in the crypto space, but it did note that, “Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications. We don’t have anything further to share.”

Information to date has come from a series of leaks and rumors. As we reported last December: “In May, the firm re-assigned David Marcus, PayPal’s former president and current leader of Facebook’s Messenger service. Marcus, an avid supporter of cryptocurrencies, subsequently departed the board of Coinbase, citing potential conflicts of interest. The word on the street is that he has already formed a unit of blockchain developers, now totaling at least forty individuals. The obvious choice of a payment service to enable “P2P” transfers had been rumored since May.”

Last December, the word on the street, according to Bloomberg, was that Facebook was planning to test a cross-border payment service for repatriation of funds to India, using its WhatsApp franchise and possibly a stablecoin pegged to the U.S. Dollar as a medium of exchange. The backbone of the service would be a blockchain driven platform, supposedly well into development at that time.

Acceptance of cryptocurrencies in India is a hot debate at the moment. Government officials in a select committee are discussing whether the country should lift its “quasi” ban on all things crypto. The central bank has currently forbidden banks from servicing crypto-related companies, which could pose a major challenge for Facebook’s plans, when domestic citizens attempt to convert its planned stablecoin to local Rupees.

Crypto enthusiasts have looked on with favor as titans in various sectors of global commerce and the investment trade have openly embraced the crypto ecosystem. For Facebook, it is an obvious choice to explore ways to leverage its own 2.3 billion active customer base for profit. Fidelity Investments, ICE, the parent company of the New York Stock Exchange, and the Nasdaq have also made demonstrative moves in the crypto arena, as well. One can only speculate what Google, Amazon, Twitter, and Apple have in the works, but all in good time.

The reason for the Chainspace synergism may be in the details of its whitepaper that called for a “distributed ledger platform for high-integrity and transparent processing of transactions within a decentralized system.” This type of platform could address speed issues with crypto payments at the point-of-sale and continuing regulatory concerns over transparency. This part of the puzzle would also fit well with another rumored Facebook acquisition, Algorand, an existing blockchain-based payments platform.

Crypto supporters have always regarded Facebook as a highly centralized commercial entity that has had an “on-again-off-again” love affair with cryptocurrencies, especially with rules related to advertising. How this corporate giant will deal with such a highly decentralized technology as blockchain remains to be seen.