Big Tech, Big Finance, and the Cryptocurrency Question

 

 

This article is provided for information and education purposes only and is not intended as investment advice. Readers are encouraged to do their own research and consult a professional before making any investment decisions.

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Traditionally, governments have held a monopoly over the economic systems and financial barter used in their nation. Today, however, with all the possibilities inherent in robust cryptocurrencies, large multinationals like Facebook, Twitter, and Google/YouTube see new opportunities to embed financial operations in their core business model.

Facebook, for example, started with the ambition of “making the world more open and connected”, based on the loosely libertarian premise of an open public forum. But with the rise of outrage culture in recent years, companies and other organizations are actively giving themselves the right to decide what can and cannot be said in online forums in order to placate the loudest voices on social media, even when those voices may not be overly representative in real-world metrics.

In terms of the right to freedom of speech and association, something enshrined to varying degrees in the human rights legislation of most developed nations and most obvious in the First Amendment of the United States Constitution, this is an incredibly dangerous development. Any entity taking on the mantle of arbiter of acceptable speech should be very cautious, especially when they have the de facto monopoly on those public global forums.

Until now Facebook has double- talked around the law to avoid being classified as either a publisher or a platform. When talking to regulators, Facebook and other big tech firms claim they are platforms that enable their users to connect with one another, a status that negates any responsibility for content posted on their platform. At the same time, however, Facebook behaves like a publisher in its interactions with users, maximizing exposure, charging advertising revenue, and moderating and suppressing content as they please. 

And now the social media giants are looking to take advantage of the financial opportunities that cryptocurrencies present their business. Facebook et al can now use their gigantic user bases to compete with retail banking, conveniently coinciding with growing public acceptance and uptake of purely decentralized cryptocurrencies operating outside the traditional system — further diminishing the market size for retail banks and eventually squeezing the latter out of the marketplace.

Of course, this has significant implications for the financial autonomy of individuals. The companies regulating social media are the same companies now competing for control of the global financial system. We have already watched PayPal, Mastercard, Visa and other more traditional financial entities use their muscle to censor controversial groups like Wikileaks.

The problem is that there is no reason to believe that Facebook will operate any differently with their Libra crypto token. They are already known to sell the data of private users, cooperate with authoritarian regimes, and the company now taking a proactive stance in determining what is and isn’t “fake news.”

Who wouldn’t want to sign over their economic freedom to such a nice group of people? Especially after they’ve worked so hard to demonstrate that they cannot be trusted to recognize or respect our other freedoms?

Of course, many of the same people who have been anti-corporate-control since forever don’t seem to have any problem with this. People need to speak up.

It was always highly unlikely that governments were just going to roll over and let this happen, and the reaction has indeed been swift. US Democrat Congresswoman Maxine Waters introduced a bill for the so-called “Keep Big Tech Out of Finance Act” to slow down the Libra project, since any competition to government financial hegemony is always going to be perceived as a threat. An early draft of the bill read:

“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.” 

At the same time, solutions like the one proposed by Binance, which assists companies and governments to create their own single-purpose coins on smaller scales, are much more likely to get regulatory approval. 

Of course, this begs the question of where the banks will go. They find themselves in a precarious position for the moment. As large businesses dominated by inertia and limited in flexibility and responsiveness, they are less likely to take big risks, as the costs for big risks are always much greater for well established companies. They are less nimble in the marketplace. It took them years to get up to speed with internet banking, and today’s market is only accelerating with new tech adoption.

Knowing their legacy systems are at risk, large banks are buying up subsidiaries and investing in conglomerates to keep one foot in the sandpit, perhaps with the intention of adopting the new technologies once they are left with no other options. This could come sooner rather than later, given that they can now view large firms in Silicon Valley as future competitors, and they know that won’t be able to capture any money funneled into the Bitcoin / cryptocurrency ecosystem since it will work outside the traditional financial system.

All of that brings us to the most important cryptocurrency question of all: where do we go from here? It’s becoming clearer every day that governments will only be able to restrain the future of money for so long; innovation will invariably have its way. But what does that mean for the people of the world? The major banks may be too cautious to make the future happen on their own – and large social media companies like Facebook have done little to demonstrate that they’re trustworthy enough to be entrusted with our economic freedom and financial information.

Given those simple facts, it’s probable that the real future of cryptocurrency as money won’t look like any of the more popular plans currently in play. The banks will continue to inch toward acceptance of the technology, but limit their use to internal and cross-border transactions. Meanwhile, governments and regulators can and almost certainly should put the brakes on Facebook’s Libra plans – at least until the company regains some measure of public trust, and possibly forever. In short, there is a pathway for cryptocurrency as the future of money – but Big Tech and Big Finance clearly don’t have the answer to how we get there.

Author: Timothy Goggin

Timothy Goggin is an economic analyst with an interest in the application of moral philosophy and decentralized systems. He studied economics at the Business School at Victoria University of Wellington, New Zealand. His area of research is the consequential and moral dimensions of implementing digital currencies and the resulting synergies for consumers in the trading environment.

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