- The primary mission of the “Keep Big Tech out of Finance Act.” is to prevent tech giants from becoming financial institutions
- The draft prohibits tech institutions with a revenue of $25 billion to provide financial services like online public marketplaces, exchanges, or platforms for connecting third parties
- A fine of $1 million per day shall be imposed on violators
Bitcoin was designed with principles of decentralization as its core ideology which means that cryptocurrencies weren’t meant to be regulated by any central authorities. As both cryptocurrencies and blockchain technology are still in the early stages authorities are struggling to settle on a regulatory path. Congress doesn’t yet have a systematic approach to the regulation of cryptocurrencies. With Facebook’s Libra on the rise, and many soon to follow, the authorities see Billion Dollar tech institutions in the financial services industry as a threat. In order to counter these major tech companies, House Democrats have drafted a discussion bill titled the “Keep Big Tech out of Finance Act.”
A wall between commerce and Banking
The draft surfaced first on the popular digital library Scribd and was leaked by a user named Ryan Todd. The primary mission of this bill is to prevent tech giants from becoming financial institutions as well. The development took place right before Facebook’s hearing regarding its cryptocurrency, Libra. This surely seems well timed.
The document states:
“A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System.”
According to the draft, any tech company with at least $25 billion in revenue and providing services like online public marketplaces, exchanges, or platforms for connecting third parties would be under prohibition. Companies in violation of any of the above shall be fined a whopping $1 million per day. The House of Financial Services Committee Democratic majority has drafted this to ensure that there is “a firewall between commerce and banking.”
Congress has Libra in Sight
The Crypto space has seen a lot of thrashing from politicians and regulatory bodies lately. This draft is no surprise because quite recently, Fed Chair Jerome Powell raised serious concerns regarding the various downsides like money laundering, privacy and data protection, of a global digital currency like this. This was followed by a rampage of tweets from President Donald Trump, who mentioned in one such tweet that:
“Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and international.”
Financial Services Chairwoman Maxine Waters (D-CA) has also called on Facebook to halt the Calibra initiative until lawmakers and regulators can study it. A memo was also issued by the Financial Services Majority to committee members detailing various concerns about Libra. They memo mainly raises concerns regarding the security of digital assets. A part of the memo reads:
“To facilitate its cryptocurrency transactions, Facebook intends to manage and hold a detailed digital repository of social, financial, and governmental data, which may further increase their hacking risks. Facebook has had issues with safeguarding its users’ information in the past. For example, Cambridge Analytica, a political consulting firm had access to more than 50 million Facebook users’ private data which it used to influence voting behavior.”
With the various criticism Libra is receiving from the authorities, it is quite clear that this draft was not coincidental, with David Marcus, Facebook’s head of Calibra, set to testify before a Senate Banking Committee and House Financial Services Committee this week, this feels like a well-played card from the Congress. If this draft is issued, it could pose serious threats to the adoption of cryptocurrencies globally.