With the price of bitcoin trending upwards on the CoinDesk Bitcoin Price Index, the digital currency market is once again showing resilience, even in the face of controversial news from the People’s Bank of China (PBOC) and the Internal Revenue Service (IRS).
However, while these events saw major government agencies attempting to limit how funds could be handled by bitcoin businesses and imposing accounting requirements on bitcoin users, a new report has suggested that bitcoin could soon face another threat, this time in the form of viable competition that could hinder adoption in the short term.
The Financial Times reported on 13th April that Facebook is reportedly exploring an electronic mobile money service that would allow users throughout Europe to exchange units of monetary value through a process called “passporting”.
Passporting allows businesses to conduct operations in the European Economic Area (EEA) under a single market directive, which would enable Facebook’s credit institution to reach multiple markets. Armed with this classification, Facebook would be able to receive deposits from the public and grant credits for its accounts anywhere in the EEA, the European Banking Authority suggests.
The FT notes these units of value would represent claims against the company, which would then be exchanged. The media outlet said that Facebook has so far spoken with three companies – Azimo, Moni Technologies and TransferWire – about the service, but that the company has not confirmed the reports.
Community unfazed by Facebook’s plans
Still, even accounting for Facebook’s name recognition and brand value, major bitcoin investors don’t see the social networking service as a significant threat to bitcoin.
One of the foremost reasons, according to Wedbush Securities managing director Gil Luria, is that Facebook is still relying on the same antiquated infrastructure of companies like MasterCard and Visa for payments.
“The type of innovation coming from bitcoin technologies is a leap that will take time for these mainstream companies to adapt to, so I doubt anything Facebook can do right now goes much farther than a prepaid account funded through existing payment networks.”
Adam Draper, founder and CEO of bitcoin-focused venture fund Boost VC, also echoed Luria’s response, stating that bitcoin’s long-term value will likely win out over competitors.
Still, he was enthusiastic that the news means Facebook is looking to attack similar problems as entrepreneur in the bitcoin community. Said Draper:
“This is exciting, it means that the big companies are playing in the space.”
Impact on the remittance market
Facebook’s intent isn’t limited to Europe alone, however. One source told the FT that the mobile money initiative would be part of a broader attempt by the company to become a remittance provider in the developing world.
To this end, Facebook would be able to capitalize on the popularity and availability of not smartphones, but its social networking service, which serves roughly 1.2 billion users.
Given that the company purportedly plans to use passporting to enable the service, Facebook’s ability to compete with bitcoin would be limited to EEA member states.
Pelle Braendgaard, co-founder of global bitcoin wallet provider Kipochi, sees this as one of the potential service’s more limiting factors:
“Payment systems require a wide enough network that they are useful for users. Bitcoin provides that and it may be easier for Facebook to eventually build a wide enough network for this, but it isn’t a given.”
Bitcoin-based remittance service specialist, Tomas Alvarez of Coincove, wasn’t fazed by the prospect of new competition either.
“I think that unless they adopt a more efficient way of sending money (*wink crytpo-currencies *wink) they might end up with a PayPal (expensive) that runs on Facebook.”
Still, should Facebook enter the market, Alvarez hinted it could beneficial at removing the stigma associated with adding monetary services to social networks, which could be a larger win for the bitcoin industry.
For more on bitcoin and the challenges it faces in the remittance market, read our latest report on the topic here.