The social media giant is also said to be ceding control of the digital currency to an independent foundation composed of dozens of financial institutions and other tech companies in a bid to boost its credibility and assuage the concerns of financial regulators, according to a report from news site The Information.
In fact, according to the report, Facebook will even allow employees working on the project to draw their salaries in the new currency, which is expected to be pegged to the US dollar, and also has looked at using physical machines where users can buy the cryptocurrency - – like cash-dispensing machines in reverse.
Third-party groups may also be allowed to become ‘nodes’ for the currency, although they are likely to pay as much as US$10mln for the privilege.
Nodes are bases that have the vast amounts of computing power necessary to validate cryptocurrency transactions by solving complex mathematical formulas.
Many have speculated that the digital currency will be integrated across Facebook as well as other social networks the company owns such as instant messaging service WhatsApp and picture sharing network Instagram.
The company seems to be trying to replicate the success of Chinese messaging app WeChat, which not only allows users to message each other but also offers a payment service that enables subscribers to transfer money to contacts or pay for various services through their mobile phones.
Facebook’s move into crypto also comes as founder Mark Zuckerberg continues to explore methods of weaning the social network off of its advertising-based revenue model following a series of scandals over the handling of user data, which has led to calls for tighter privacy controls and regulation over how platforms can sell info on their members.
The billionaire has previously met with Bank of England governor Mark Carney as well as US Treasury officials to assess the risks of launching a new digital currency.
Is that it(coin) for Bitcoin?
With an established tech giant such as Facebook finally planning to muscle its way into the crypto space, could Bitcoin and other digital currencies be facing extinction?
While he says the exact details of what Facebook’s cryptocurrency will actually do are still mostly unknown, McDonaugh expects it will act more like an “internal PayPal” to try to draw more users onto the platform.
He adds that cryptocurrencies like Bitcoin are currently acting more like speculative assets, with investors buying into them on the hopes that the price will rise, as opposed to the Facebook crypto which is more likely to be focused on serving as a medium of exchange for goods and services, echoing apps like WeChat.
In fact, McDonaugh says Facebook’s involvement in the space could actually be a boon for the industry as the tech giant could potentially introduce “billions of people to the concept of cryptocurrency” and raise the credibility of the technology with the wider public.
There is also the idea that using Facebook’s cryptocurrency could serve as a substitute for a bank account as a form of identity verification, while the spending would also generate useful metadata.
However, that has the potential to throw up yet more data and privacy concerns that have dogged the social network in the past.
Or, as McDonaugh puts it, “would you trust Zuckerberg with your money?”