As Off the Chain writes, this week is a big one for crypto. It may even become a defining week, when at some point we look back at its events.
The Facebook hearings in Congress play a major role in this. David Marcus has faced two different committees, neither of them over-informed about cryptocurrency in general. He sat like one man alone holding back the tide of ill-informed views held by America’s lawmakers. For example, they (and the President) are still convinced that crypto is primarily used for criminal activity, when by now we all know that cash is king in the drug world for starters.
However, while Elizabeth Warren probed the issues of privacy and trust, ever implying that it would be almost impossible to trust Facebook after the Cambridge Analytica scandal, the hearing that most concerned crypto’s supporters was that with the Banking Committee.
Old men backed by banks
As numerous journalists have noted, the average age of a US Senator is 61.8 years old, and most of them are not open-minded enough to grasp the innovations that blockchain and crypto can bring to the United States. Most of them have benefitted financially from the old system, so why change it. Who cares about the future when ‘I’m alright Jack’.
Keep Big Tech Out
These hearings were significant, but even more noteworthy was information leaked over the weekend regarding a bill that has been drafted by Congressional representatives aimed at preventing large technology companies from becoming financial institutions. It is literally titled “Keep Big Tech Out of Finance Act” and contains a number of extremely worrying statements, with potentially dangerous ramifications.
The Act targets companies like Facebook, Amazon and Uber, but totally ignores the fact that Goldman Sachs and JP Morgan are engaged in the same blockchain-related projects as the Silicon Valley boys.
And consider this: the same lawmakers who are participating in the Senate Banking Committee hearing, are some of the lawmakers who have received significant donations from the banking industry. These guys are hardly going to make changes that have a negative effect on banking.
The cost of prohibition — America loses
They are also proposing to prohibit digital currencies and this would put the United States and US-based technology companies at a significant disadvantage. There was some irony in Marcus being asked as to why Calibra had registered in Switzerland rather than the USA. There’s your answer, although Marcus simply said they were already an American company.
Several journalists have also noted that this Act proposes a daily penalty of $1 million for any tech company flouting its rules. Significantly, most observers agree that Facebook can afford to pay that fine with ease, and that they will probably just see it as the cost of doing business.
If the United States cannot get behind digital currencies it will lose out to Southeast Asia where there is widespread adoption: instead of Facebook’s Libra becoming a leader, AliPay and WeChat Pay will be the platforms used internationally.
It looks like the Big Tech companies in the US are going to have to play ball with Wall Street, something they have managed to avoid in the past. Will they abandon their attachment to liberal principles and embrace those of the less principled occupants of the Street? Let’s see. But I doubt it will be possible to keep them out of finance in the long term.