The world’s biggest social media platform Facebook announced that it would be launching a digital currency called Libra next year. But their announcement has raised more eyebrows than they could have imagined.
Could Facebook thrash the tech industry’s ambitions?
According to the latest report by Reuters, the Democrat-dominated House Financial Services Committee is planning to launch a proposal that prevents big tech from working as financial institutions. A copy of the draft legislation seen by Reuters suggests that it will include a ban on issuing digital currencies as well. This could easily thwart Facebook’s plan of launching Libra and also crush the ambitions of other big tech firms who may be planning similar projects of their own.
The new bill proposes a fine of $1 million per day for the violation of its provisions which could discourage big tech from participating in the industry. The Republicans are expected to oppose this proposal in the name of innovation, but they are also struggling to gather votes in the lower chamber. This isn’t to say that all Republicans will be keen on a lenient stance on digital currencies. President Donald Trump criticized digital currencies in a series of tweets last week, questioning their valuation and reliability. He also targeted Facebook and said that the company must get a banking charter if it wants to act like a bank.
What is the act all about?
The draft legislation titled “Keep Big Tech Out of Finance Act” suggests that large technology companies with a core business of offering online platform service and those who have annual revenue of $25 billion must not be allowed to work in the financial services space. If the bill passes the full houses, it might have to face some struggles in the upper house.
Whether or not the bill is expected, the US lawmakers are sending a strong message to big tech that they don’t appreciate their entry in financial services. It suggests,
“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.”
Federal Reserve chair Jerome Powell has expressed his concerns about Libra before, and he reiterated his statements during a Capitol Hill hearing last week. He noted that the company could not continue building Libra unless it answers grave concerns about financial stability, consumer protection, privacy, and money laundering.