Please tell us what you're really after, Facebook. Over the past year and a half we've got no more than a few scattered glimpses into whatever the hell Facebook is building behind the keycard-protected doors of its mysterious blockchain project. The latest come from a new BBC report claiming Facebook is "finalizing plans" to launch its own "cryptocurrency" next year in about a dozen countries. As a cherry on top, the BBC said the internal name for the project is "GlobalCoin."
Okay, so what is it really building? Lots of people seem certain that it's not a real cryptocurrency, and that it will be more like PayPal than Bitcoin. There really isn't enough public evidence yet to warrant such a view. But if that speculation is right, it's hard to see why Facebook needs a blockchain. In other words: What's the catch?
It's been a long strange trip since December of 2017, when we got our first clue that Facebook was into the blockchain. The news was that David Marcus, then head of messaging at Facebook, would join Coinbase's board of directors. In May of that year, Marcus announced that he would set up "a small group to explore how to best leverage Blockchain across Facebook, starting from scratch." Three months later Marcus left Coinbase's board, apparently to avoid the appearance of a conflict of interest.
In December 2018, Bloomberg reported that Facebook would launch a digital coin whose value would be pegged to a stable fiat currency. It added that the company was looking specifically at integrating this into WhatsApp, and launching it in India. Though these latter details have since faded into the background, in February the New York Times seemed to confirm that the project would indeed involve a stablecoin, which could be backed by a number of different fiat currencies.
One of the most curious events in the whole timeline, at least from a technological perspective came in early February, when Cheddar reported that Facebook had acquired a small blockchain startup that was focused on developing techniques that would let smart contracts be deployed on a larger scale than they can be on Ethereum, the most popular smart contract platform. This seemed to suggest that the company had wandered fairly deep down the blockchain rabbit hole.
This month, the pace of the drip-drip has picked up. Just before the BBC report, the Wall Street Journal reported that Facebook has been recruiting financial companies and merchants to join a cryptocurrency based payment system. The WSJ also revealed another internal code name: Project Libra. Then Reuters reported that Facebook had formed a new financial technology company in Switzerland, called Libra Labs. (Are they different projects? Who knows!)
We get it: Facebook is building a big global-scale payments project. But there are still huge holes in this picture. Is it really a cryptocurrency? Given the company's track record, why should we trust that this will respect user privacy? Most importantly, what's in it for Facebook?
Kik says it needs your money to defend crypto. The messaging app raised $100 million selling its digital currency, called Kin, via an initial coin offering back in 2017. Now, it wants you to help it raise more. If you buy what Kik is selling this time around, you won't get a token. The company thinks you should be happy with just a warm fuzzy feeling that perhaps you helped, as Kik says, "defend crypto."
What does crypto need defending from? According to Kik, the adversary is the US Securities and Exchange Commission. The agency has for months been cracking down on ICOs it says engaged in illegal sales of unregistered securities. In January, Kik's CEO, Ted Livingston, revealed that the company was expecting the SEC to deem its Kin currency a security too, and he vowed to fight the agency in court. Now Kik needs to crowdfund $5 million more for the cause, he said this week. "The continued challenge for us has been the lack of clarity on the regulatory side," Livingston said on the Unchained podcast.
Kik's dispute with the SEC may stem from a genuine lack of clear rules of the road when it comes to how the agency determines whether a given digital asset is a security. Specifically, it uses a decades-old test that deems an asset a security (and thus subject to expensive regulatory burdens) if buyers have a "reasonable expectation of profits to be derived from the efforts of others." During the ICO craze, most projects mistakenly assumed that security laws, which in principle are supposed to protect investors from getting scammed, didn't apply.
Livingston says Kin is a currency, not a security. Last month over one million users "earned" Kin while using one of the more than 40 mobile apps in which it works, he says, and 300,000 users spent the currency. He says the lack of clarity over whether something like Kin qualifies as a security is not only hurting his business, but the industry as a whole, and is pushing blockchain innovation overseas. "The only way we are going to get clarity is if somebody goes to court."
Let's take a step back, though. While the SEC may appear to some as an an adversary in this case, it's also a protector—defender even—of investors (at least, that's what it's supposed to be doing). And don't forget Kik already raised $100 million, and it's asking for more now to pay their legal fees. If it wins some clarity in court, that might help the crypto industry. But first and foremost Kik is defending itself.
What's does the future of work look like? Get a glimpse at MIT Technology Review's future of work conference, called Emtech Next, on June 11 and 12 at the MIT Media Lab. Some quick agenda highlights:
- MIT economics professor David Autor will talk about how big tech companies can hinder economic growth.
- Shelley Peterson from Lockheed Martin will talk about how augmented reality is changing how spacecraft are built. (Check out our article about this.)
- Mary Gray of Microsoft Research will discuss a book she co-authored about the future of employment, called Ghost Work.
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