Line’s Crypto-Currency Exchange Plan Swells A Tide


The announcement in late June by Japanese messaging application Line that it would launch a crypto-currency exchange in Singapore this month follows a clutch of similar chat apps swarming into different areas of financial services, as communications and financial transactions overlap in new ways.

Line’s move is indicative of the growing trend that sees consumer communication, content-sharing or gaming applications with large user-numbers being harnessed to make blockchain more accessibleOpens a new window to people who are not experts in the technology.

Line, which counts more than 200 million active monthly users worldwide and has already made a foray into financial services with its Line Pay payments service, says its exchange – Bitbox – will trade more than 30 digital tokens when it launches, including Bitcoin, Ethereum and Litecoin.

Trading on Bitbox will be supported in 15 languages and available to residents of any country, excluding Japan and the U.S. due to regulatory hurdles in those two nations.

It follows a move into crypto-currency and blockchain by encrypted free messaging app Telegram, which was developed in Russia and recently raised $1.7 billion ahead of an initial coin offering that was later canceled. Its developers planned to raise funds to develop a blockchain-based platform incorporating payments, file storage, censorship-proof browsing and decentralized apps.

Telegram, which also boasts about 200 million users, apparently withdrew the ICOOpens a new window because it raised enough money for its project and because it sought to avoid scrutiny from the U.S. Securities and Exchange Commission following a rash of hacks and fraudulent offerings. With the marketing of crypto-currencies and ICOs often likened to the Wild West, there has been a crackdown on their promotion, with Facebook, Google and Twitter all banning related advertising.

Other social apps moving into the crypto space include ad-free app Kik, blockchain-based blog site Steemit and South Korean messaging service Kakao.

China’s dominant payment systems Alipay and WeChat Pay, backed by Ant Financial and TenCent respectively, are at the forefront of the move to a cashless society and are ubiquitous among the country’s diners and shoppers for payments.

It is now also common in China for bankers to trade bonds via WeChat groups, where they agree on prices before executing a trade. The Chinese chat app and Facebook-owned WhatsApp have been in talks with a Hong Kong-based finance industry body to extend such communications to bankers beyond the mainland. WeChat has 980 million users.

Facebook, meanwhile, with monthly active users exceeding two billion and with one billion on both its WhatsApp and Messenger systems, has ambitions in the space. In May, founder and chief executive Mark Zuckerberg appointed David Marcus, the social network’s former head of Messenger, to a new blockchain research groupOpens a new window , to investigate how it could use the digital ledger technology.

Marcus was previously president of payments group PayPal and is also a board member at digital currency exchange Coinbase.

Speculation about how the company could harness the technology include providing more private streams for users amid the recent scandal over the harvesting of user data by political consultancy Cambridge Analytica. It could also allow micropayments, potentially leading to an “explosion of applications,” according to Sheila Warren, head of blockchain at the World Economic Forum.Opens a new window

The technology giant could also be seeking to arm itself against potentially competitive technologies by getting involved at the early stages. Its strategy in the past has been to buy the competition, as it did with WhatsApp in 2014 and photo-sharing network Instagram in 2012.

Tanner Philp, director of corporate development at Kik, has argued that Facebook’s heavily centralized control might not function well with the private and disjointed structure of blockchain, with the largely unregulated crypto world traditionally backed by libertarians. Initially a secretive military tool, cryptography is now trickling down to the individualOpens a new window , with the cryptocurrency revolution allowing people to communicate and pay for services, sometimes bypassing governments and big companies altogether.

How that would work within Facebook remains to be seen. WhatsApp’s co-founder Jan Koum left the company in May following a clash with the parent company over its attempts to use the messaging service’s data and weaken its encryption.

However, as apps like WeChat, Telegram and now Line are showing, speedy and integrated means of communication and financial transactions are surging forward. Despite the huge fluctuations in the value of digital tokens, particularly Bitcoin, the tidal wave of interest in crypto-currencies means technology companies cannot afford to be left behind.