Facebook’s head of financial services and payment partnerships for Northern Europe, Laura McCracken, recently disclosed while talking to a German business magazine and confirmed that GlobalCoin will have multiple pegs. In order to understand the significance of this piece of information, the need is to understand the concept of a stablecoin’s pegging with fiat and the need for it.
The arrival of Facebook’s cryptocurrency is making a lot of noise in the crypto world right now. Everyone is awaiting what the biggest social media platform of the world is going to bring to the table on a global scale. Just recently it was reported that Facebook is going to reveal its cryptocurrency “GlobalCoin” later in this month of June. Now it is being reported that the company’s stablecoin, GlobalCoin is going to be pegged with multiple fiat currencies instead of just one.
Stablecoins essentially combine the worlds of crypto and traditional fiat currency together. The properties of transparency, trustlessness, and decentralization that come from the cryptos world are fused with the stability that the fiat provides. Traditional cryptos like bitcoin are often criticized for their price volatility, are not preferred to make payments and send money.
People tend to hold onto such assets with expectations of their prices rising up in the future so that they can trade them at a better price in order to gain as much profit as they can. Stablecoins take out this aspect out of the window by pegging with fiat which makes them a more preferable channel to send and receive money and perform online transactions for purchasing or selling purposes.
READ ALSO: Facebook Crypto to Hit the World This Month
Usually, stablecoins are pegged to major currencies like the U.S. dollar to provide clear cut value estimations. Gemini dollar, for example, has a peg with the U.S. dollar. But with Facebook’s GlobalCoin, the market not just limited to one country.
Facebook is arguably the biggest social media platform of the world with monthly active users of over 1 billion. These users stem from various parts of the globe. The decision to keep multiple pegs of the GlobalCoin stems from the fact of easing users across countries and different economic zones. Users can exchange the digital currency easily with their own native country and can get proper estimates of the value of their holdings.
With regulatory issues tackled and its goals set straight, the Facebook’s cryptocurrency is getting ready to face the music. But one of the important factors to keep in mind is the question that how will it affect the rest of the crypto space? Is it a positive move for cryptos or will Facebook’s cryptocurrency shift the focus away from the core idea of cryptos decentralization by being a stablecoin, as they are not pure cryptos owing to the fiat peg?
The difference of stablecoins from conventional cryptos are pegged to fiat, all the shortcomings of the traditional banking system also get inherited into the stablecoin space. Cryptos poise themselves against the fiat system by providing an alternative route. But stablecoins inherit the issues like inflation into their ecosystem. Due to this reason, stablecoins are not hailed by hardcore crypto enthusiasts that much.
Overall, Facebook’s crypto is expected to play a more positive role for crypto’s adoption as it will expose a wide audience across the globe with the prospects offered by cryptos. Performing transactions through the social media channel will open up the cryptos world to a wide range of new audience. The negative connotation attached to cryptos in the mainstream media is also expected to get mitigated as more positive usage of cryptos will be highlighted.
Facebook’s cryptocurrency is surely expected to set out ripple across the ocean of the global financial system. The company is seemingly coming in with all its precautionary steps as it is reportedly in talks with regulators to tackle the regulatory issues and with crypto industry leaders to provide the best-suited cryptocurrency. It will be interesting to see what Mark Zuckerberg has planned for the crypto world when it comes to the nascent space of cryptocurrencies and blockchain.