If Facebook bought Coinbase would it work?

The social media giant has had its own blockchain team for months.

Rumours of a Facebook takeover of cryptocurrency app Coinbase are not going away, according to an article in the Economist.

But what could one platform comprising of the world’s most popular social network and the most downloaded app of last year look like?

Coinbase is now believed to be worth around £6 billion and has seen over $150 billion traded on its platform since 2012.

And Facebook is now courting Coinbase pretty heavily too after the VP of its Messenger app, David Marcus, joined the Coinbase board in December 2017. With cryptocurrencies now firmly in the mainstream after December’s bitcoin price spike, Coinbase’s current chief operating officer said the ‘most obvious path’ for the company is to go public. Unless, of course, Facebook get there first.

Acquiring Coinbase would be a move away from Facebook’s recent acquisitions of the likes of social media rivals Instagram and Whatsapp.

Facebook has spent £23.1 billion buying up companies.

More data on spending habits

It seems that a Coinbase/Facebook integration would open the door for Facebook to create an internet of value and hold even more data on people, eventually potentially creating a platform not dissimilar to the Chinese app AliPay which allows users to order food, hail cabs and pay bills through its app. A controversial social ranking system on AliPay is also believed to be in the works.

Thierry Clarke, CEO of InvestorConnected, a business platform, told GrowthBusiness that the deal would be exciting for Facebook and Wall Street. ‘Payments and finance are areas that Facebook has fell behind compared to the likes of Apple and Google’, he said. ‘If Facebook can successfully integrate themselves into the crypto community, or indeed even launch their own cryptocurrency in the long-term, it would provide added legitimacy to this still emerging market and see massive potential to gain huge market share in this space.’

Coinbase is broadly respected and liked amongst the crypto-currency community but it remains to be seen whether crypto early adopters will continue buying and selling bitcoin, ethereum and bitcoin cash on Coinbase if it is integrated with Facebook. Coinbase, who are located just a 40-minute drive from Facebook’s headquarters in Menlo Park, California, already have several venture capital backers and are not adverse to corporate funding.

One cryptocurrency enthusiast said of the potential deal, ‘It would certainly be a quick way of getting a fully fledged multicurrency wallet service allowing mobile payments outside of the Visa/MasterCard/Amex hegemony that Google Pay and Apple Pay currently piggyback.’

However, Clarke warned that if a deal was to go ahead, it would not be without its risks. ‘Facebook’s reputation has taken a battering over recent months with issues around user privacy and manipulation of user data. One of the key appeals around cryptocurrency relate to the anonymity it provides users, something which regulators across the world are becoming concerned about.

‘If not managed carefully, this could be a clash of principles that end up costing the Facebook brand even more embarrassment.’

George Zarya, CEO of crypto-broker Sequant Capital, also struck a cautious tone. ‘Even with a well-known name such as Facebook behind it, there will still be difficulties in making the currency legitimate in the eyes of potential investors.

To avoid this, he said the social media giant would need to ‘think ahead’ and be compliant with the Second Markets in Financial Instruments Directive (MiFID II).

‘This can set a good standard that not only makes Facebook’s involvement with cryptocurrency more legitimate, but also sets a strong foundation for future regulation in this sector,’ he added.

It seems that a Coinbase and Facebook tie-up would not be without its risks, but a supercharged venture into mobile payments could prove too tempting for Mark Zuckerburg to resist.

Further reading on cryptocurrencies

The advantages of creating a cryptocurrency company

Michael Somerville

Michael Somerville

Michael was senior reporter for GrowthBusiness.co.uk from 2018 to 2019.