Can Facebook’s GlobalCoin Effect Ecommerce?
For many years, rumors have swirled about Facebook’s entrance into cryptocurrency while the social networking giant worked quietly to find out its approach. Details are emerging. In this post, I’ll clarify Facebook’s strategies and the impact on ecommerce merchants.
Facebook GlobalCoin
Facebook is allegedly rolling out an electronic payments system next year that will permit Facebook users (as well as WhatsApp and Instagram users) to pay for products and services using Facebook’s own cryptocurrency, dubbed”GlobalCoin.”
GlobalCoin will be a so-called”stablecoin,” meaning low price volatility, particularly compared to additional cryptocurrencies such as Bitcoin and Ethereum. Low volatility will presumably promote adoption and use for transactions, where steady prices are crucial to facilitate a common understanding of value for both buyers and sellers as well as to guarantee consistent value with time.
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GlobalCoin will be a so-called “stablecoin,” meaning low price volatility…
Volatile monies are near useless for transactions. Such monies become investments, encouraging customers to hold until the price rises. Similarly, merchants are less inclined to take GlobalCoin if there were a danger of it losing substantial value when they sold their merchandise but before they converted to local currency.
To guarantee price stability, Facebook will peg GlobalCoin into a basket of international government-issued monies, such as the U.S. dollar, euro, and Japanese yen. If it follows the approach of other stablecoin jobs, Facebook will use a huge reserve of these international currencies to buy and sell GlobalCoin to cancel price movements.
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Facebook is trying to make sure that GlobalCoin has broad financial institutional support by at least partly decentralizing the management of the money among many organizations as part of an independent base. This not only distances Facebook in the regulatory obstacles of conducting its own money but also enables and incentivizes adoption by attracting other big institutions, such as Western Union, in the fold.
Ecommerce Merchants
Up to now, crypto payments for online transactions have neglected to procure widespread adoption, in part because of volatility. However, this will probably change, as customers become more comfortable or don’t realize their purchases demand crypto.
With GlobalCoin, ecommerce merchants can opt to participate, or not. Below are some advantages.
- Early adoption promotions. Facebook will most likely reward merchants for premature approval of GlobalCoin, while also greatly promoting it to customers. Merchants can search for opportunities to participate if interested.
- Developing Nations. If an ecommerce company has clients in developing countries, GlobalCoin might be a fit. Facebook is allegedly pushing adoption in countries which are traditionally underserved by large financial institutions. Accepting GlobalCoin may offer a cost-effective means to enlarge a presence in these markets.
- Reduced transaction processing charges. Processing payments through GlobalCoin will most likely be less expensive than traditional credit card processing charges.
Conversely, accepting GlobalCoin has risks, such as:
- Privacy. Processing transactional data creates new privacy issues for Facebook. Merchants and consumers should carefully track how Facebook will utilize the information.
- Conversion to local money. Facebook is taking steps to help convert local currency into GlobalCoin (and vice versa) in ATMs and other exchanges. Merchants should assess the procedure, timing, and cost of the conversion to make sure it functions for their capital requirements.
- Regulation. Facebook’s size can cause regulators worldwide to limit or outlaw GlobalCoin. Merchants will have to track the legalities in their regional markets.
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