Over a Dutch website I got triggered by this article in the New York Times. The article is about Facebook’s currency called “Credits”. The article shows that Credits is changing more and more from virtual currency on Facebook to real convertable currency.
For those not familiar with Facebook: it’s a social network site which holds around 500 million active users. Facebook claims that at least 50% of these users are logged in on any given time of the day. Facebook is translated in 70 languages. The bottom line: it’s HUGE. The founder of Facebook is 26 year old Mark Zuckerberg. Economists claim that Facebook’s worth now would be $ 33.7 billion (!!!) if Zuckerberg would sell his baby. He claims that he won’t go to the stock market before 2012, though. The reason why all this interests me is because Leann is a Facebook expert (addict?).
Back to the currency. Taking the “Credits” offline and into the real world creates risks if you ask me. Just 30% of the 500 million active users are based in the US, so 70% of these users are outside the US. Facebook becomes sort of a bank for 500 million people if this plan goes through. Financial institutions are regulated everywhere. The financial crisis worldwide has learned that this is highly necessary. I believe that if Facebook’s plan goes through, they become a sort of financial institution. A big one for that matter. Let’s make a calculation:
AIG was too big too fail and needed a $75 billion capitalization to be kept alive. Let’s divide that amount by the number of Facebook users (500 million). That means that if every active Facebook user would have the counter value of $150 in their account, you would reach that $75 billion. A thread? You bet! Feasible? Definitely! Remember that Facebook’s current marketvalue is $33.7 billion, right?
The real question is: how is our 26 year old friend going to manage all that money. How do we know that our “money” is safe? When is Facebook “too big too fail”? Interesting, right? So, in other words: Facebook needs oversight from the point of view of consumer protection. Just like the banks do. Who will oversee this new Facebook Bank? Because 70% of the active users are outside the US, I don’t think the US Government or responsible offices would have the right mandate to oversee this new “currency”. This creates the situation that there is no worldwide institution being able to oversee Facebook’s activities.
I hope that more people will actually wake up and smell their coffee. Facebook could turn into a serious disaster if this plan grows over Mark’s head with a worse economic situation as a result. Let’s think first, yes?