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US proposes preventing tech companies from offering financial services

US proposes preventing tech companies from offering financial services
A proposal to prevent big technology companies from functioning as financial institutions or issuing digital currencies has been circulated for discussion to the House Financial Services Committee in US, CNBC reported.

The proposal is likely to 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.

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.

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

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,” the draft 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, PayPal and Uber, would form the Libra Association to govern the new coin. No banks are currently part of the group.

Last week, U.S. President Donald Trump criticized Libra and other cryptocurrencies and demanded that companies seek a banking charter and make themselves subject to U.S. and global regulations if they wanted to “become a bank.”