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India: Why Facebook’s pet crypto-project could trump other competitors

Namrata Shukla



India: Why Facebook's pet crypto project could trump over others
Source: Pixabay

In disappointing news for Indian crypto-enthusiasts, the Indian Supreme Court adjourned the ‘Crypto Vs RBI’ case hearing on March 29, failing to bring regulatory clarity on cryptocurrencies in the country. However, almost a month after the hearing, rumors of the government’s plan to completely ban cryptocurrencies surfaced. The rumors added fuel to the fire as the Indian crypto-community panicked over the fact that they could lose their funds if the said ban was implemented. However, crypto-influencers have asked the community to be patient until the next hearing in July 2019.

Amidst the ongoing confusion in the country, Facebook, the social media giant, is planning to launch its first cryptocurrency in India in the next quarter, if reports from Bloomberg are to be believed. The publication noted that out of 50 people working for Facebook’s blockchain platform, one among five had previously worked for PayPal Holdings Inc.

Now, Facebook and the team aims to integrate payments into its platform, according to the publication. The social media giant plans on introducing a stablecoin pegged to the US dollar and allow users to transfer money across the world via Whatsapp using this stablecoin. However, the Indian government has not passed an ordinance declaring the legal status of cryptocurrencies, putting the future of the project in a limbo.

Facebook ‘stablecoin’ in India post regulation

In a scenario where the government of India deems cryptocurrencies and its transactions legal, Facebook might have a head-start in the crypto game due to Whatsapp. If the social media giant allows crypto-transfers on Whatsapp, like its payment gateway which is still running on beta, approximately 200 million users will have access to crypto-trading.

Even though many scams and thefts in the Indian crypto-sphere have surfaced, the population, in all probability, will trust Facebook, Whatsapp, and Instagram due to their familiarity. Michael Novogratz, a prominent Bitcoin [BTC] proponent, had said that Facebook’s launch of its own crypto is great news since it reflects the social media giant’s faith in crypto.

Why is it that Facebook would find success with their current project, while many Indian crypto-exchanges are shutting shop? There are four primary factors which could drive the Facebook-Whatsapp project to sure-shot success,

1.User base
As mentioned above, Whatsapp has over 200 million users in India alone. The addition of a crypto-payment feature after the launch of the coin is almost inevitable. The addition of a new feature for the Indian population, something like WhatsApp Pay, is quite possible as it would smoothen crypto-transfers via Whatsapp to anyone.

2. Accessibility/ Usability
Whatsapp will have an upper hand if it launches the stablecoin right after the government of India declares cryptocurrencies legal because of its accessibility factor. As and when the trend of crypto catches up in the country, its adoption could be made easier with an app that is already available on people’s cellphones, thus providing them with a larger market.

3. Layered transactions
Crypto transfers can work broadly in two ways on WhatsApp.

  • Whatsapp as a mediator

In this model, the transactions would take place directly from banks to the recipient to whom the sender wants to send their funds, via Whatsapp. Whatsapp could only act as a crypto-payment facilitator when crypto is legalized in the country.

  • Whatsapp as a wallet

If Whatsapp applies the operation of other payment apps in the country such as Paytm or Phone Pe with an in-built wallet, then transactions can take place via UPI. The user could add money to their ‘Whatsapp Wallet’ and carry out transfers and trade activities from it. However, this a loophole Whatsapp can use in case the government levies a ban on cryptocurrencies. However, it would be highly detrimental to their reputation.

From a legal perspective, this will enable many crypto-adopters to be closer to their crypto payment app, than any other medium.

4. Trustability

According to a report by Business of Apps, 82% of Indian internet users use Whatsapp, which puts the messaging app right behind Facebook and YouTube. The same report noted Whatsapp as the most active messaging social media platform in the country.

These stats provide a basis of the relationship between the people of India and Whatsapp. Whatsapp has an upper hand in gaining people’s trust and explaining the benefits of crypto to them due to its accessibility and large user base. Considering the crypto-penetration in the country, India still has a long way to go towards the adoption of crypto. Being an early service provider, Whatsapp can bring in more people due to its brand name and the value of trust it brings with it.

India and Crypto

According to a January 5 report by Economic Times, leading companies in India like Hindustan Unilever Ltd [HUL], Reliance Industries, HDFC Bank, and ABG Shipyard are running pilots on using cryptocurrency for internal purposes. The report quotes that these companies won’t be in violation of any regulatory norm as they would be using the cryptocurrencies internally and not for any ‘speculative purposes.’

However, there are no updates about where these companies stand amidst rumors of a crypto-ban and the government’s shrouded regulatory stance.

As for Facebook and its trial crypto-project, the path is treacherous. If India outrightly bans cryptocurrencies in July 2019, it will have to take its pet project elsewhere as according to the law, it would be illegal to trade in any form of cryptocurrency in the country.

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JP Morgan: Big banks stand corrected as Bitcoin rally past intrinsic value; admits current surge mirrors 2017 rise




JP Morgan: Big bank stands corrected at Bitcoin rally past intrinsic value; admits current surge mirrors 2017 rise
Source: Pixabay

Big banks are riding a FOMO wave as the Bitcoin bull-run is just beginning. Spearheaded by the changing colors of JP Morgan, which recently forayed into the digital assets world, the banking elite is now suggesting that their initial stance on Bitcoin and the larger cryptocurrency world might have been off.

A recent chart by JP Morgan shows the current BTC price veer upwards chiding the “intrinsic value” the big bank placed on the virtual currency.

Based on the article by Bloomberg, the price of the coin would reverse towards the end of December 2018 and then make marginal gains until May 2019, all under the $5,000 mark. In reality, the BTC price, after dropping to “rock bottom” at just above $3,100 in early December 2018, edged upwards.

Several spurts of growth were seen in early January and February, prior to a massive April ascendance. On April 2, Bitcoin did away with the bank’s value mode and amassed a daily gain of over 15 percent, fuelling its current rise. Breaking the $5,000 ceiling in the process, which was pegged to remain intact well into May 2019, the king coin is now almost $3,000 ahead of the mark and is not looking to stop.

Source: Bloomberg

It should be noted that JP Morgan’s “intrinsic value” is calculated on the basis of the marginal cost of production, electricity prices, and hash rates. This model does not take into account, at least on absolute terms, the anticipatory effect of the 2020 halving, which, according to a slew of analysts is the behind the price rise.

Nikolaos Panigirtzoglou, the MD in the Global Market Strategy team at JP Morgan stated that Bitcoin breaking through its “intrinsic value” showed signs of mirroring its 2017 bull run. He evidenced this move by comparing the pre-December 2017 slump to the one seen prior to the current bullish swing.

The analyst added:

“Over the past few days, the actual price has moved sharply over marginal cost. This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices.”

With the analyst admitting that the imparting of an “intrinsic or fair value” to a cryptocurrency, much less a volatile one like Bitcoin, is a “challenging” ordeal, a mere JP Morgan acknowledgement of a Bitcoin bull-run is a remarkable sign for the digital assets industry, especially given the bank’s and its CEO Jamie Dimon’s Bitcoin-bashing in the past.

Mati Greenspan, senior market analyst at eToro attested to the same, adding a key point that JP Morgan failed to take into account in their calculation. He stated:

“Great to see JPM finally admitting that Bitcoin has intrinsic value.
Now wait till they understand that miners who run a surplus tend to begin hording.”

Despite Bitcoin slumping at press time, recording a 1.23 percent decline against the dollar, the prospects look positive. After recording a massive gain on 19 May, briefly surging past $8,000 for the second time in a week, Bitcoin created a High-Low [HL] at $7,100, which many analysts look at with glee.

This HL immediately following last week’s pull-back caused due to post-Consensus bears, a Bitstamp sell-order and market correction showed the king coin’s bullish persistence and can even be a foundation for a $9,000 ascendance, defying any “intrinsic value” expectations.

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