SAN FRANCISCO - Silicon Valley finds itself trapped in political purgatory. Facebook can afford to shrug off an expected $5 billion fine over privacy, but the $580 billion social network and several of its peers face a grilling from regulators and Congress on multiple fronts. Big tech doesn’t want a Wall Street-like straitjacket, but growth will suffer without clear rules of the road.
Facebook is already feeling the Washington heat. U.S. Treasury Secretary Steven Mnuchin said Monday that the company had a long way to go to convince regulators that its planned cryptocurrency will meet the same anti-money laundering and know-your-customer standards as traditional banks. That echoed warnings expressed last week by Federal Reserve Chairman Jerome Powell. The U.S. House and Senate will hold hearings on the planned coin, dubbed Libra, on Tuesday and Wednesday.
Separately, a House antitrust subcommittee will question executives of Facebook, Amazon, Apple and Alphabet's Google about their market power. And the Federal Trade Commission is finalizing its record settlement with Facebook, which is accused of inappropriately sharing data with now-defunct political consulting firm Cambridge Analytica.
Big banks faced similar scrutiny after the 2008 financial crisis, culminating in the Dodd-Frank rules on capital and liquidity as well as stress testing and other measures. While JPMorgan and others complained, the legislation had the benefit of clarifying what they could and couldn’t do.
Congress is nowhere near that point with tech. Lawmakers have debated new privacy rules but they are unlikely to be finalized this year. The FTC and the Justice Department have also divvied up the biggest tech firms for possible antitrust probes, but that could take years.
In the meantime, tech struggles to figure out what can pass muster with Washington. Facebook briefed lawmakers and watchdogs about its crypto plans, and gained enough comfort to announce Libra in June. But now it’s facing calls to halt or at least slow the project. In addition to the warnings from Mnuchin and Powell, Reuters reported that House Democrats are mulling barring big tech companies from issuing digital currencies.
Washington can also put enough pressure on tech firms to paralyze them from embarking on big deals. Silicon Valley’s disruptors, until recently hostile to regulation, now have a vested interest in having a clear rule book.
- The U.S. Treasury has “serious concerns” that Facebook’s planned cryptocurrency, Libra, could be misused by money launderers, Secretary Steven Mnuchin said on July 15. He said his department has been very clear to Facebook and other providers of digital financial services “that they must implement the same anti-money laundering safeguards in countering the financing of terrorism as traditional financial institutions.”
- The banking committees in the U.S. Senate and U.S. House of Representatives will hold hearings on Facebook’s proposed crypto coin on July 16 and 17, respectively. Another House hearing on July 16, held by the antitrust subcommittee, will focus on online platforms and market power. Executives from Amazon, Apple, Facebook and Google are expected to testify.
- Separately, Reuters reported on July 12 that the U.S. Federal Trade Commission approved a $5 billion fine for Facebook, which is accused of inappropriately sharing the data of 87 million users with now-defunct British consulting firm Cambridge Analytica. The Justice Department has to approve the settlement, which could also include other restrictions for the company.
(Editing by Tom Buerkle and Amanda Gomez)
© Reuters News 2019