In June, Facebook publicly launched an initiative to develop a cryptocurrency called Libra in partnership with 27 other technology and finance companies including Visa, PayPal and Uber. According to Facebook, consumers will be able to buy Libra anonymously and then use the currency to buy things online, send money to people, or cash out at physical exchange points such as grocery stores. The blockchain technology behind Libra is meant to be open-source and not controlled exclusively by Facebook, but by an association of its founding companies, each of which has already invested at least $10 million into the venture.
Facebook’s announcement triggered a rapid response from federal legislators, and on July 15 the House Financial Services Committee introduced draft legislation aimed at preventing large tech companies from creating digital currencies such as Libra. Entitled “Keep Big Tech Out of Finance Act,” the draft legislation would apply only to tech companies with over $25 billion in annual global revenue that primarily operate online marketplaces or social platforms. Such companies would be prohibited from using blockchain or distributed ledger technology to create or operate “a digital asset that is intended to be widely used as a medium of exchange, unit of account, store of value, or any other similar function.” The draft legislation would further prohibit such tech companies from being or affiliating with “a financial institution.”
The draft legislation is just the latest indication that federal legislators and regulators are increasingly focused on the growing linkages between technology, particularly in the form of social media and online marketplaces, and more traditional consumer finance industries.