US Government Considers Banning Big Tech Companies From Moving Into The Financial Sector

Lately, there has been increased scrutiny on cryptocurrency by regulators and governments across the world. The attention has increased significantly since Facebook announced its project Libra, a global cryptocurrency that is designed to make payments easier worldwide. President Donald Trump of American even tweeted about cryptocurrencies, making specific reference to Libra and Bitcoin.

In his description of cryptocurrency, President Trump said that cryptocurrencies are volatile, based on thin air, a medium for criminal activity and inherently invaluable. He went on to say that Libra would never be a proper replacement for the US dollar and that Libra should comply with banking charters.

Trump’s attitude and view towards cryptocurrencies appear to be a reflection of the general views of the United States government. The Treasury, through its Secretary Steve Mnuchin, issued a statement saying that they would be taking a hard stance against the use of cryptocurrency in illegal activity. During the weekend, it was also revealed that US representatives may be looking at their options as far as disallowing “big tech companies” from engaging in financial services.

Libra At Risk

Facebook and other Silicon Valley giants may soon be unable to enter the financial industry in any significant way. A draft bill titled “Keep Bitcoin Tech Out Of Finance Act” is set to ban big tech companies from establishing, maintaining or operating a digital asset. The digital assets in question fulfill the three tenets of money that are medium of exchange, a unit of account and store of value.

The companies which will be governed under the bill are technology firms with annual revenue exceeding $25 billion and whose main business is offering marketplaces, exchanges or mediums through which individuals and groups can connect (social media). The bill proposes a daily fine of $1 million for companies that will be in violation of the terms stipulated by the bill.

Is The Bill Justified?

While the bill can easily be viewed as an attempt by the US government to stop the advent of alternative currencies, it can equally be viewed as an attempt to protect people from financial risk. Having big tech companies dabble in finance may come with risks to financial stability and data protection,

The involvement of big tech companies could also create monopolies which would be damaging to investors and other smaller Wall Street institutions. Banking institutions could be rendered useless by the tech companies which will then have absolute control over the world’s financial systems.

On the back of these concerns, David Marcus, VP of Blockchain at Facebook, issued a statement reassuring concerned parties that Facebook and its partners will be operating within the law. This reassurance seems to be insufficient in convincing the US government that Libra is being developed with the right intentions in mind.