Interest in Facebook’s forthcoming stablecoin is beginning to take hold in the broader financial market.
According to a report published by CNBC on Mar. 11, Barclays analyst Ross Sandler wrote in a client note that the “Facebook coin” could generate as much as $19 billion in additional revenue by the year 2021. The advent of a new revenue stream in the form of a stablecoin-backed payment protocol would be a windfall for Facebook’s share price, which took a hit in 2018 amid a series of scandals related to user privacy.
Sandler looks to the establishment of a stablecoin, which so far has been proposed for Facebook’s messaging platform Whatsapp, as a substantial source of revenue for the social media giant outside of their reliance on pure advertising, a move that Sandler finds is “sorely needed at this stage of the company’s narrative.”
Assuming cryptocurrency implementation works out for Facebook, Barclays reports the upside to be worth an additional $19 billion in revenue for the company within the next several years, with the base-case, conservative estimate pegged at $3 billion. While Facebook will have its hands full in initiating a smooth launch for the stablecoin and securing adoption for its near 3 billion platform users, its worst-case scenario still appears profitable according to the banking analyst.
Sandler told CNBC,
“Merely establishing this revenue stream starts to change the story for Facebook shares in our view.”
As CNBC points out, Facebook’s decision to rely upon a stablecoin format for their upcoming currency, which will rely on the value of several different fiat currencies, should be more attractive to investors and users given the highly volatile state of cryptocurrency prices. Sandler’s views Facebook’s move into a crypto-backed payment platform, which provides padding beyond what advertising revenue can bring in alone, as a substantial benefit to shareholders, saying,
“Any attempt to build out revenue streams outside of advertising, especially those that don’t abuse user privacy are likely to be well-received by Facebook’s shareholders.”
Interestingly, Sandler points out that the most recent news related to stablecoin development is not the first time that Facebook has tried its hand at building a payment protocol. In 2010, the company created a virtual currency called “Facebook credits”, which CNBC describes as similar to modern-day cryptocurrency. Users would exchange fiat for these credits, which would then allow for in-app purchases. However, Facebook was forced to carry the cost of interchanging between fiat and digital credits, which severely cut into the profitability of the venture and led to the project being scrapped.
Sandler and his research at Barclays believes the earliest iteration of the Facebook coin will be a “single purpose coin for micro-payments and domestic p2p money transfer (in-country), very similar to the original credits from 2010 and Venmo today.”
With former PayPal President David Marcus heading Facebook’s blockchain and stablecoin projects, Sandler believes that the company has more ambitious plans for its payment platform project compared to the failed attempt in 2010. In addition, a recent blog post by Facebook CEO Mark Zuckerberg makes it all the more apparent that the company is looking for innovative ways to increase user security, with cryptocurrency being a logical continuation for payments. If all goes according to plan, Sandler could see the company extending into the realm of consumer lending, remittance and physical payments, an industry that cryptocurrencies across the market have been attempting to capitalize on.