Social media giant Facebook has reportedly attracted more than a dozen major names as backers for its planned GlobalCoin cryptocurrency, a stablecoin that has been under development since late last year and is about to be officially unveiled.

According to a Wall Street Journal report, the founder members include Visa, MasterCard, PayPal and Uber as founder members and each will invest around US$10 million in the project as part of a governing consortium.

Facebook has turned to major financial services players both for funding to support the development of the project and to minimise the volatility that has been a feature of cryptocurrencies such as bitcoin. Other backers are said to include payments technology company Stripe, travel-reservation site Booking.com and Argentina-based e-commerce site MercadoLibre.

In return for their support, each firm will get a node on the network. This ensures that no-one organisation has complete control over the currency and at the same time opens up unfettered access to user's transactional data.

No US dollar peg

Facebook first released news about GlobalCoin last December but indicated that it had been considering a cryptocurrency initiative since late 2017. GlobalCoin is expected to be a stablecoin that will operate within the company’s messaging infrastructure – WhatsApp, Instagram and Facebook Messenger.

Two weeks ago Facebook’s head of financial services and payment partnerships for Northern Europe, Laura McCracken, said that the company will release the whitepaper for its digital currency on June 18. She also said  that although GlobalCoin will be a stablecoin, it will not be pegged against the US dollar as had been assumed. Instead, the digital currency will derive its value from a basket of fiat currencies.

GlobalCoin is likely to closely scrutinised by financial regulators and will have to adhere to strict anti- money laundering (AML) and know your customer (KYC) requirements in each country it operates in.

The BBC has suggested that Facebook may look to retailers to help the new currency gain traction, allowing its users to purchase discounted goods using the cryptocurrency. The cryptocurrency would be used to transfer value directly from Facebook to the retailer, cutting out credit card companies in the middle and helping retailers’ profits.

On the public policy front, Facebook has recruited a senior British corporate affairs specialist to front up its dealings with regulatory authorities. Ed Bowles, Standard Chartered’s European head of corporate and public affairs, will join Facebook in September as its London-based director of public policy.

Facebook has up to two billion active monthly users, all of whom will eventually be able to use the social media network’s native payment system to make low-cost digital payments without the need for a bank account.

This will mean competition for the go-to online payment services, such as PayPal, Stripe, and Skrill, especially if Facebook delivers on its promise to offer low-cost digital payments.

PayPal, for example, charges a 3% transaction fee, which takes a substantial cut out of businesses and freelancers who use their payment service for the majority of their transactions. Unless PayPal and its peers lower their fees in response to the new competition from Facebook, they could end up losing substantial market share.