Congress is dead serious about nipping Facebook’s Libra cryptocurrency in the bud. The House Financial Services Committee has drafted a Libra killer bill that bans big tech companies from launching cryptos. It’s called the “Keep Big Tech Out of Finance Act.” A draft copy of the discussion bill found its way into the hands of Ryan Todd at The Block.
The anti-Libra bill bans “large platform utilities from being a financial institution or being affiliated with a person that is a financial institution.” It does so by stipulating:
“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.”
The bill defines a large platform utility as any company with annual global revenues above $25 billion. Facebook revenue was $16.9 billion for Q4 2019 alone. So the Keep Big Tech out of Finance Act says Mark Zuckerberg’s too big to crypto.
Where does that leave Twitter founder and bitcoin bull Jack Dorsey and his Square payments platform? He’s safe for now. Twitter revenue for the twelve months ending March 31, 2019 was $3.164 billion. If the keep big tech out bill becomes law, it looks like Square Payments may be even more undervalued than one Wall Street analyst argued earlier this month.
While the bill does have teeth, it might not bite hard enough to deter Facebook. It plans to enforce the crypto prohibition on big tech with a fine of $1 million a day. Facebook might be able to make far more than that with Libra. It can just write this off as a cost of doing business. After the recent record-breaking $5 billion FTC fine for privacy violations, Facebook’s market cap surged $10 billion. That made its privacy violations worth at least $5 billion.
The House bill to protect Wall Street from Libra surfaced ahead of Facebook’s showdown with Congress this week. The social media giant and other big tech companies (Google, Amazon, and Apple) will appear in antitrust and privacy hearings Tuesday. The Silicon Valley titans will have to confront lawmakers’ efforts to regulate them further.
Representatives from Facebook, Inc. will face the Senate Banking Committee Tuesday in a hearing entitled, “Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations.”
There won’t be any friendly faces on the committee. None of the committee members are among Facebook’s top recipients for campaign donations.
It will be interesting to watch this cat and mouse game ensue. Facebook will downplay Libra’s disruptive relevance to Congress while the company hypes it to investors.
The specter of regulation looms over corporate cryptos. Even if the Keep Big Tech Out of Finance Act never makes it to Trump’s desk. Legislation and regulation will undoubtedly round off the edges of any corporate crypto by the time it sees the light of day. As events in this new industry play out, they continue to validate the macro-thesis underlying bitcoin and its most vociferous supporters.