By Daniel Livingston, Partner and Scott Colvin, Lawyer
Leaked documents purporting to be a draft of forthcoming US House of Representatives legislation (and as reported by Reuters) suggests that the US will move to ban Facebook’s much-touted cryptocurrency, Libra.
The ‘Keep Big Tech out of Finance Act’ would ban any ‘large platform utility’ from establishing, maintaining or operating a digital asset that is ‘intended to be widely used as a medium of exchange, unit of account, store of value’, or similar.
‘Large platform utility’ captures business that earn global annual revenue of USD$25 billion or more and that predominantly offer online marketplaces, exchanges or platforms for connecting third parties. Facebook is likely the only company that meets this definition, though Google may as well, depending on how certain phrases are interpreted.
The Libra cryptocurrency is considered to be the greatest threat to the hegemony of the Federal Reserve since the launch of Bitcoin. Libra has the potential to take a significant portion of the traditional banking and payment services industry from traditional players. This would have a number of significant knock-on effects in the finance industry and beyond, and could move the epicentre of the money world far from its traditional players.
A congressional Senate Banking Committee inquiry will hear from David Marcus, who has been appointed by Facebook to oversee Libra, at the end of this week. A number of American lawmakers have expressed concerns in relation to the use of Libra in money laundering, fraud, and other illegal activities.
Marcus is expected to confirm that Libra will not be launched until regulatory concerns are addressed.
Libra has also come in for criticism from President Donald Trump, who suggested that Facebook would need a banking licence to issue its cryptocurrency, a sentiment that has been echoed by many Washington insiders.
The debate about whether Facebook should, or should be able, to issue its own cryptocurrency is the latest talking point in an ongoing debate about the place of digital financial assets in a society that is still very much rooted in traditional financial institutions.
Cryptocurrencies are at the precipice of mainstream adoption, having survived several long winters in countercultural movements and the tech space, before more recently moving into the collective conscious. What remains to be seen is if (and perhaps when) digital assets will be adopted as the norm, not the exception — and who will control the rules of the game.
Whatever the answers to these questions are, the US has an opportunity to put a significant marker in the ground one way or another. Its current lead in the tech world means it is hardly surprising that its companies are pushing the boundaries in this space. But that dominance is under increasing threat from others, and crypto leadership may follow when the supremacy shifts.
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