Facebook is finalizing plans to launch its own cryptocurrency next year. It is planning to set up a digital payment system in about a dozen countries by the first quarter of 2020.
The social media giant wants to start testing its cryptocurrency, which has been referred to internally as GlobalCoin, by the end of this year.
Facebook is expected to outline plans in more detail this summer and has already spoken to Bank of England governor Mark Carney.
Founder Mark Zuckerberg met Mr. Carney last month to discuss the opportunities and risks involved in launching a crypto-currency.
Facebook has also sought advice on operational and regulatory issues from officials at the US Treasury.
The firm is also in talks with money transfer firms including Western Union as it looks for cheaper and faster ways for people without a bank account to send and receive money.
How will Facebook’s crypto-currency work?
Facebook wants to create a digital currency that provides affordable and secure ways of making payments, regardless of whether users have a bank account. The social networking site, which owns WhatsApp and Instagram, is hoping to disrupt existing networks by breaking down financial barriers, competing with banks and reducing consumer costs.
Virtual currencies can be used to pay for things in the real world, such as a hotel room, food or even a house. Digital tokens are held in online wallets and can be sent anonymously between users.
Cryptocurrencies run on blockchain technology. A blockchain is a ledger of blocks of information, such as transactions or agreements, that are stored across a network of computers.
This information is stored chronologically, can be viewed by a community of users, and is not usually managed by a central authority such as a bank or a government.
The concept was designed to ensure security and anonymity for users, by preventing tampering or hijacking of the network.
Crypto-currencies are vulnerable to fluctuations in value, which Gerard said could create a barrier to the success of Facebook’s so-called GlobalCoin.
“Normal people don’t want to deal with a currency that’s going up and down all the time,” he explained.
But Garrick Hileman, a researcher at the London School of Economics, said the GlobalCoin project could be one of the most significant events in the short history of crypto-currencies. Conservatively, he estimated that around 30 million people use crypto-currencies today. That compares to Facebook’s 2.4 billion monthly users.