U.S. proposes barring big tech companies from offering financial services, digital currencies - RTRS

In a report titled, "U.S. proposes barring big tech companies from offering financial services, digital currencies," writters Pete Schroeder and Ismail Shakil for Reuters explained that there has been a proposal in the US to prevent big technology companies from functioning as financial institutions or issuing digital currencies has been circulated for discussion by the Democratic majority that leads the House Financial Services Committee, according to a copy of the draft legislation seen by Reuters.

"In a sign of widening scrutiny after Facebook Inc’s (FB.O) proposed Libra digital coin aroused widespread objection, the bill proposes a fine of $1 million per day for violation of such rules.

Such a sweeping proposal would likely spark opposition from Republican members of the house who are keen on innovation, and would likely struggle to gather enough votes to pass the lower chamber," the article reported. 

Even if it were to pass the full house, it would still have to pass the senate which would also likely be an uphill struggle. Nevertheless, the draft proposal sends a strong message to large tech firms increasingly eyeing the financial services space.

The draft legislation, “Keep Big Tech Out Of Finance Act”, describes a large technology firm as a company mainly offering an online platform service with at least $25 billion in annual revenue.

“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,” it proposes.

Facebook, which would qualify to be such an entity, said last month it would launch its global cryptocurrency in 2020.

Facebook and 28 partners, including Mastercard Inc (MA.N), PayPal Holdings Inc (PYPL.O) and Uber Technologies Inc (UBER.N), would form the Libra Association to govern the new coin. No banks are currently part of the group.

This news follows last week's pressures for the space that came on the back of U.S. President Donald Trump's first reported and outright criticism of the space and specifically targeting Facebook's 'Libra', weighing into the world of Bitcoin. Trump was warning Facebook over its plan to create its own digital currency. As the article reported, his comments came after Federal Reserve Chairman Jerome Powell told lawmakers that Facebook’s plan to build a digital currency called Libra could not move forward unless it addressed concerns over privacy, money laundering, consumer protection and financial stability.

Trump has branded "unregulated crypto assets" as based on "thin air." However, the bitcoin price rose slightly following Trump's comments last week as bitcoin traders and investors bet that Trump's acknowledgement of bitcoin will bring greater awareness of crypto and could push prices up. Today, we have seen the opposite:

BTC/USD seesaws near 13-day low amid growing pessimism for Cryptos