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house Bill H.R. 4813

Should ‘Big Tech’ Companies be Prohibited From Offering Banking Services?

Argument in favor

Big tech giants like Facebook are rapidly entering the financial services market without ensuring that consumers are properly protected or that they’re compliant with applicable regulations. This trend is worrying given these companies’ size, the amount of consumer data they own, and, in Facebook’s case, its history of privacy violations. Keeping big tech companies out of banking is an important check against these companies becoming “too big to fail,” using their user data to boost their banking businesses, or morphing into monopolies that control too many aspects of consumers’ lives.

burrkitty's Opinion
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11/23/2019
Company scrip has been done before and it’s a exploitation technique. Dressing it up in technology, a pretty marketing plan, and offering it to the public can’t change that. Most of the world has truck laws that outlaw this type “currency” so I don’t know why it’s even a question except for ignorance of the history or not making the connection to what it is. You know the song “Sixteenth Tons” by Merle Travis? That song is about the economic exploitation of coal miners forced to use scripts. Let’s not repeat the mistakes of the 19th century.
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RjGoodman's Opinion
···
11/23/2019
I would go one step further and say that any non financial services company should be prohibited from offering banking services. With big tech giants like Facebook and Alphabet are rapidly entering the financial services market without ensuring that consumers are properly protected or that they’re compliant with applicable regulations. One of my biggest concerns about these companies is cyber security. Large companies have a history of poor security infrastructure. Banks have a hard enough time keeping their data secure, I have no faith in these non financial companies spending the money to properly secure their data. I am also concerned that these companies will use their banking information to market their other products and services. This trend is worrying given these companies’ size and the broad spectrum of products and services. Keeping big tech companies out of banking is an important check against these companies becoming “too big to fail,” or morphing into monopolies that control too many aspects of consumers’ lives.
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Anthony's Opinion
···
11/23/2019
As a retired bank executive,I urge federal legislation to restrict all banking activities to the highly regulated banking industry. The reason banks are regulated is enormous impact on individuals and society. Risks are mitigated by government restrictions and controls and an appropriate adversarial relationship between banks and government regulators.We saw first hand,the damage that can be done not only to the US,but to world economies,when political and other inappropriate incentives weaken the kinds of checks and balances that results from this adversarial tension. Tech companies already have an enormous concentration of power on all societies,increasing such powers is unwise and dangerous.
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Argument opposed

Barring big U.S. tech companies from entering the banking sector is likely to cause the U.S. to fall behind in cryptocurrency and digital payments, ceding this important aspect of the future global economy to competitors like China. The supposed appropriate separation between banking and commerce is an artificial product of lobbying by the banking industry, and doesn’t need to be preserved to keep consumers safe. Regulators should allow anyone — including big tech companies like Facebook — who wants to innovate in the payments space to do so.

larubia's Opinion
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11/23/2019
Funny that banking industry wants to put the kabosh on tech companies entering their domain for fear that they could become too big and monopolize the market! Wow! I have a hard time feeling worried for the banking industry. No, they should be allowed to create and compete with global markets already in play.
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Sheila's Opinion
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11/23/2019
No, these tech companies have no business in the banking industry.
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Leo's Opinion
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11/23/2019
We should not stop technology from progressing. What needs to be done is applying financial regulations to the emerging online banking sector.
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What is House Bill H.R. 4813?

This bill — the Keep Big Tech Out of Finance Act — would close a series of loopholes that allow commercial firms to obtain bank charters. It would prohibit large platforms, such as Facebook, from becoming financial institutions or operating a digital asset intended to be broadly used as a medium of exchange.

Violations of this bill would be punished by a fine of up to $1 million per day while the violation remains unaddressed.

A “large platform” would be defined as a tech company with annual global revenues exceeding $25 billion.

Impact

Banking consumers; cryptocurrency consumers; potential Libra consumers; tech companies with annual global revenues exceeding $25 billion; tech companies with annual global revenues exceeding $25 billion that want to enter the banking sector; Libra Association; and Libra stablecoin.

Cost of House Bill H.R. 4813

A CBO cost estimate is unavailable.

More Information

In-DepthSponsoring Rep. Jesús “Chuy” García (D-IL) introduced this bill to block Facebook from developing digital currency through the Libra Project

“I introduced the Keep Big Tech Out of Finance Act… [to] prevent Facebook and other tech giants from developing digital currencies or assets like Libra. Big tech companies like Facebook are entering the financial services market at an alarming rate. Given the enormous access that tech giants like Facebook have to people’s data and their ability to manipulate markets through their size and power, the prospect of them operating a bank or currency is troubling. Left unregulated, Facebook is another ‘too-big-to-fail institution’ like those that caused the 2008 financial meltdown. Not only will Facebook use their monopoly on private data to manipulate markets, consumers will be exposed to immense financial risks without government protections for their money or investments. [Facebook CEO] Mr. [Mark] Zuckerberg stated that Facebook should not be regulated like a bank or by the SEC, despite growing expert legal agreement about how to protect consumers. Zuckerberg basically said that he doesn’t want anyone looking over his shoulder or reviewing his company’s books. Given Facebook’s track record of evading criminal liability, abusing private data, and manipulating markets with their monopolistic power, regulators should be considering how to break up Facebook, not greenlighting a new, dangerous project like Libra. We have a responsibility to protect the American public and every day consumers. To do so, we must hold Big Tech giants like Facebook accountable and keep them from entering the currency market. My Keep Big Tech Out of Finance Act does just that.”

In another statement, Rep. García also argued that tech companies should seek to partner with government, not to create their own independent systems: 

“If big tech is interested in advancing a system that they feel is important in the 21st century, they should seek to partner, perhaps, with government and not lay out a completely independent system.”

CREDO Action supports this bill. It identifies four key problems with Libra, arguing that it would: 1) centralize corporate control by giving Facebook more power and undermining sovereign states’ currencies; 2) promote tax dodging and money laundering by making it easier for people to hide their money in a new network with global reach; 3) erode freedom due to lack of clear limits on Facebook’s ability to use data from Libra purchases, racist discrimination into its algorithms, change the rules in the future, or demand that employees take payment in its currency; and 4) put consumers at work with none of the guarantees, oversight, and protections in traditional banking. With these concerns in mind, CREDO says

“Libra is already under pressure, with a handful of major partners dropping out even before Zuckerberg's testimony. But at a time when Big Tech is increasingly looking for ways to expand its monopolistic power and use vast reams of data to move into finance, we need a more thoughtful response. Rep. García's legislation, the Keep Big Tech Out of Finance Act, would prohibit Facebook and other big tech companies from preying on us with digital currencies – and we need to make sure every member of Congress knows it has our support.”

Federal Reserve Chairman Jerome Powell testified to the House Financial Services Committee about his concerns with Libra in July 2019. He said:

“Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability. There are concerns that should be thoroughly and publicly addressed before proceeding.”

In mid-July 2019, Treasury Secretary Steven Mnuchin raised concerns that Libra could be used to finance terrorism to due its opacity. He said, “We will not allow digital asset service providers to operate in the shadows.” 

In a July 11, 2019 tweet thread, President Donald Trump also raised concerns about Libra: 

“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity. Similarly, Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International. We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the World, and it will always stay that way. It is called the United States Dollar!”

John Berlau, a senior fellow at the Competitive Enterprise Institute, argues that it would be a mistake to allow politicians to bar technology firms from entering banking. In a July 25, 2019 Forbes op-ed, he wrote: 

“Washington politicians may disagree on what to do at the U.S. border, but when it comes to technology firms entering banking, it seems many from both parties want to build a wall. Ironically, this virtual barrier would primarily keep out not foreign financial firms, but American non-bank innovators with new financial products that could greatly benefit American consumers. For these politicians, ever since it announced plans for a cryptocurrency called Libra, Facebook has become the number-one figurative barbarian at the financial gate… [P]oliticos seem to dismiss Libra, which would be jointly managed by Facebook and dozens of members of the Libra Association, without giving any mind to the benefits it could offer in expanding access to capital, credit, and basic banking services. The Libra white paper introducing the cryptocurrency points out that particularly for lower-income consumers, ‘hard-earned income is eroded by fees,’ and ‘blockchains and cryptocurrencies have a number of unique properties that can potentially address some of the problems of accessibility.’ We have yet to see if blockchain and cryptocurrency can live up to this promise, and even if they do, whether it will be Libra that will come out on top… But none of the cryptocurrencies will likely reach their full potential in aiding consumers if well-managed companies are barred from entering this sector… [A]lthough the technology envisioned by Facebook and other backers of the Libra currency is new, U.S. policymakers have a long history of telling innovative firms to “keep out” of finance. These restrictions have demonstrably harmed American consumers, savers, and entrepreneurs.”

Berlau added that the “supposed wall of separation between banking and commerce rests on a very shaky foundation,” dating back to Congress blocking non-financial firms from going into banking at the politically powerful bank lobby’s behest—not due to any well-thought out policy considerations. Citing a 2011 Milken Institute report by financial analysts James R. Barth and Tong Li, he also noted that the U.S. is “virtually the only industrial country that broadly bans nonfinancial firms from establishing banking units” (according to the Milken Institute report, the U.S. is the only G20 country opposed to the mixing of banking and commerce).

Facebook argues that Libra would increase financial inclusion for those without access to financial services (however, the mechanism by which it would achieve this isn’t clear). Rep. Rashida Tlaib (D-MI) says Libra targeting the unbanked without sufficient financial literacy is precisely her concern. She says, “My worry is that they're going to target communities like mine. My residents are not going to be ready, they're not going to fully understand what the implications here are.” Rep. Brad Sherman (D-CA) was even more pointed in an October 24, 2019, House Financial Services Committee hearing on Libra, calling Libra a “Zuck Buck” and comparing it with “powerful burglary tools.” Sherman questioned Libra’s necessity for the poor and unbanked and argued that, unlike the U.S. dollar, would provide greater solutions for tax evaders, drug dealers, and terrorists.

In his testimony during the July 2019 Libra hearings, Facebook vice president David Marcus argued that Libra is necessary to keep the U.S. ahead on digital payments and currencies, saying: 

“I am excited about the potential that Libra holds, and I am proud that Facebook has initiated this effort here in the United States. I believe that if America does not lead innovation in the digital currency and payments area, others will. If we fail to act, we could soon see a digital currency controlled by others whose values are dramatically different. I believe that Libra can drive positive change for the many people who would benefit from it. I also believe that it can provide an opportunity for leadership consistent with out shared values.” 

Marcus also provided some information on Facebook’s plans for Libra’s management and regulation. He said, “All decisions will be made democratically and transparently,” and that the Libra Association will be supervised by the Swiss Financial Markets Supervisory Authority (FINMA), with the Swiss Federal Data Protection and Information Commissioner (FDPIC) as the Libra Association’s privacy regulator.

Facebook CEO Mark Zuckerberg choed Marcus’ testimony on his October 24, 2019, testimony before the House Committee on Financial Services. Noting that “China is moving quickly [toward] the launch of a similar idea in the coming months,” he made the case for Libra as a way to protect American financial leadership

“Libra is going to be backed mostly by dollars, and I believe that it will extend America’s financial leadership around the world, as well as our democratic values and an oversight. But if America doesn’t innovate, our financial leadership is not guaranteed.”

Zuckerberg also called the financial industry “stagnant” and said that there’s currently “no digital financial architecture to support the innovation we need.” With those observations, he argued that Libra could help address these problems.

Rep. Andy Barr (R-KY) expressed support for Zuckerberg and Libra in the October 24 hearing, praising his innovative approach to financial services: 

“Criticism is cheap. Anybody can criticize. As you can see here today, politicians in Washington are pretty good at lodging criticism. But creating something of value is significantly more difficult, and I would commend you for being an innovator and trying to create something of value.”

This legislation doesn’t have any cosponsors. It’s expected to struggle to pass due to resistance from innovation-oriented House Republicans. Passage in the GOP-controlled Senate is similarly expected to be an uphill battle.


Of NoteThe Libra project is a stablecoin developed by the Libra Association, a Geneva, Switzerland-based organization. In June 2019, it announced plans to develop Libra, a currency built on a blockchain and backed by a reserve of real assets, the Libra Reserve. Libra is intended to be available through a standalone app and through Facebook’s Messenger and WhatsApp products. Unlike traditional cryptocurrencies, Libra would be designed to target more mainstream users, particularly those who don’t engage with the traditional financial system but who have access to mobile phones (the unbanked sector).

Although Facebook is one of several founding members of the Libra Association, everyone agrees that it’s the de facto controller. This is especially true in light of the fact that Facebook is the sole owner of Calibra, a digital wallet for holding Libra coins.

In most ways, Libra acts a cryptocurrency like Bitcoin, but it would be under Facebook’s control. In testimony before the House Financial Services Committee on October 23, 2019, Facebook CEO Mark Zuckerberg said that Libra shouldn’t be regulated by a bank or by the Securities and Exchange Commission (SEC).

Recently, Facebook has come under fire over privacy concerns. It’s currently under investigation by 47 state attorneys general and regulators in multiple nations, and recently paid a record-breaking $5 billion fine for privacy violations that allowed a right-wing firm to exert influence in the 2016 election.


Media:

Summary by Lorelei Yang

(Photo Credit: “Libra Coin 3D Render” by btckeychain  via Flickr / Creative Commons)

AKA

Keep Big Tech Out Of Finance Act

Official Title

To prohibit large platform utilities from being a financial institution or being affiliated with a person that is a financial institution, and for other purposes.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
  • The house has not voted
      house Committees
      Commodity Exchanges, Energy, and Credit
      Committee on Financial Services
    IntroducedOctober 23rd, 2019
    Company scrip has been done before and it’s a exploitation technique. Dressing it up in technology, a pretty marketing plan, and offering it to the public can’t change that. Most of the world has truck laws that outlaw this type “currency” so I don’t know why it’s even a question except for ignorance of the history or not making the connection to what it is. You know the song “Sixteenth Tons” by Merle Travis? That song is about the economic exploitation of coal miners forced to use scripts. Let’s not repeat the mistakes of the 19th century.
    Like (39)
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    Funny that banking industry wants to put the kabosh on tech companies entering their domain for fear that they could become too big and monopolize the market! Wow! I have a hard time feeling worried for the banking industry. No, they should be allowed to create and compete with global markets already in play.
    Like (19)
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    I would go one step further and say that any non financial services company should be prohibited from offering banking services. With big tech giants like Facebook and Alphabet are rapidly entering the financial services market without ensuring that consumers are properly protected or that they’re compliant with applicable regulations. One of my biggest concerns about these companies is cyber security. Large companies have a history of poor security infrastructure. Banks have a hard enough time keeping their data secure, I have no faith in these non financial companies spending the money to properly secure their data. I am also concerned that these companies will use their banking information to market their other products and services. This trend is worrying given these companies’ size and the broad spectrum of products and services. Keeping big tech companies out of banking is an important check against these companies becoming “too big to fail,” or morphing into monopolies that control too many aspects of consumers’ lives.
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    The question regarding should big tech be prevented from offering banking services is too broad. I can only opine regarding certain banking services with a lot of ‘where as’ and ‘what for’ disclaimers. First, any banking service needs to have the same regulation and oversight as any traditional banking service irrespective of who offers it. Crypto currency services, if offered, needs clear rules and regulations regarding it’s use no matter who offers it- financial services or tech platforms. While the ability to rapidly exchange funds is attractive, the anonymity currently afforded crypto currency transactions could easily be abused by foreign governments and illegal enterprises. I do not want to ‘institutionalize’ money laundering by tech companies or banking institutions until the anonymity aspect is removed. Putting these services on broadly used social media sites is way too open to all kinds of abuse and if readily and broadly available, could be used by adversaries as a tool to destabilize financial markets and the overall economy. In terms of simple transaction services like credit card transactions, bill payment or gifts of money expedited by big tech platforms- I see very little to be concerned with since the banks and underwriting credit card institutions have rules, regulations and oversight, and have records of what went where and when. Finally, the access to personal data which could be abused is a big issue and the misuse of personal data collected by big tech platforms or big bank institutions should be punished severely, even if such use was ‘accidental’. The transfer of personal data from big tech platforms to big data operators supports one of the biggest hidden industries in existence today which generally knows more about each of us then we actually know about ourselves; they buy this data from a variety of sources, digest and compile it, and sell it to anyone interested in monitoring or influencing you or I individually or people within highly selective demographic groups. The trump campaign hired Cambridge Analytica which used Facebook data and big data sources to develop psychological profiles of voters in key electoral college swing districts, to use proven military grade psy-ops targeted messaging to influence select voters in order to capture electoral college votes. I think that penalties on the sale or purchase of such data is needed and that any platform which accidentally or intentionally abuses their stewardship of personal data should be severely fined and barred from offering banking-like services of any kind for a period of say 5 years- and that any tech platform that has accidentally or intentionally abused their stewardship of our personal data within the past 5 years should not be permitted to offer banking services of any kind. In short, crypto-currency: no until anonymity is removed. General bank transactions: yes , if proper stewardship of personal data is demonstrated and is not abused.
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    As a retired bank executive,I urge federal legislation to restrict all banking activities to the highly regulated banking industry. The reason banks are regulated is enormous impact on individuals and society. Risks are mitigated by government restrictions and controls and an appropriate adversarial relationship between banks and government regulators.We saw first hand,the damage that can be done not only to the US,but to world economies,when political and other inappropriate incentives weaken the kinds of checks and balances that results from this adversarial tension. Tech companies already have an enormous concentration of power on all societies,increasing such powers is unwise and dangerous.
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    I agree with burkitty. Dressing up like a sheep does not change the wolf! Whatever you want to name it, this is bad for people!
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    Do You real want a monopoly, invasion of privacy, your life open up to the world and corporate government with no accountability, until its to late? That is what corporations will do after the fact, a knee jerk reaction!
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    We need many regulations to ensure our money is protected when we make a deposit. And, we need to re-establish banking regulations to keep banks and mortgage companies from going under again
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    This smacks of the “company store” where the workers got paid in money other than government issued money & then had to spend their pay in a store run by the company. Only federally licensed entities should be able to BE A BANK. This whole idea is crazy and sounds iffy at best. So many things could go wrong.
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    Libra would: Centralize corporate control by giving Facebook more power, undermining sovereign states and giving the corporate interests behind the project the ability to distort global currencies or undermine governments at will. Promote tax dodging and money laundering by making it easier for people to hide their money in a new network with global reach. Erode freedom with no clear limits on Facebook's ability to use data from Libra purchases, bake racist discrimination into its algorithms, change the rules in the future or demand that employees take payment in currency it controls. Put consumers at risk with none of the guarantees, oversight and protections found in traditional banking.
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    Another confusing question. Yes they shouldn’t. But some conservative judges feel a need to payback those who put them on the Supreme Court so they claim unlimited contributions to campaigns (bribery) is free speech and compromised politicians will allow it.
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    No, these tech companies have no business in the banking industry.
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    Yes of course! We don’t need yet another reason to distrust tech. And then combine with another extremely distrusted industry in banking? Come on guys! A maelstrom of distrust this country does NOT need! Tech stays tech, and banking stays banking. And never the twain shall meet, please!
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    Banking is a totally different business. Tech already has control of much of our personal lives. They need to stay in line with their original mission statement.
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    These big tech companies are ruining the country by pushing into multiple different industries and using their financial muscle to strip the consumer of choice.
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    First step in trust-busting big tech. Next? Designation as media company subject to liability laws.
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    Been done and didn’t work well
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    We should not stop technology from progressing. What needs to be done is applying financial regulations to the emerging online banking sector.
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    Monopolies destroy economies. Stop letting billionaires write public policy!
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    Since when are monopolies considered a good thing, even if it is the logical conclusion of a pure capitalist economic and financial system?
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