Big Tech Firms Becoming Financial Service Providers Are Risky To Economy: EU Regulator
The European Union released a strong statement on the risks Big Tech raises in entering the traditional world of finance, possibly targeting Facebook’s Libra currency which is expected to launch in Q2 2020. The report calls on regulators to take necessary steps to regulate the industry to protect the users from financial scams and risks pertaining to Big Tech.
Notwithstanding, the executive vice president of the European Commission also issued a memo on the progress of regulating Libra in its jurisdiction and the risks stable coins offer to financial systems. ESMA Report on Trends, Risks and Vulnerabilities, Vol.1 2020,
“The high level of market concentration typically observed in Big Tech may get carried into financial services, with potentially adverse impacts on consumer prices and financial stability.”
European securities regulator warns on Big Tech in Finance
In a report released on Feb. 19, the European Securities and Markets Authority (ESMA), warns on the risks that Big Tech firms such as Facebook, Alibaba, WeChat and Amazon pose when taking on financial businesses in their coffers. Facebook is one of the most prominent tech firms to announce its indulgence in the digital asset world announcing the launch of its Libra token in July 2019. ESMA report Feb. 19 2020 wrote,
“Given the vast amount of sensitive consumer information they handle and the scale of their existing operations their [Big Tech’s] entry into finance also poses distinct risks to markets and consumers.”
The need for governments to look at possible regulations in the crypto industry increased once Facebook stablecoin, Libra, was announced in mid-2019. With the launch expected sometime this year a number of governments have come forward to enquire about possible risks the token raises. The European Union in particular has had a special interest in Facebook’s token.
European Commission VP, Valdis: “Still figuring what to do with Libra”
The executive vice president of the European Commission, Valdis Dombrovskis, sent out a memo on Feb.18 stating the commission is still “figuring what to do with Libra.” The commission is working with Libra Association to understand the system and possible risks the platform holds to users. Despite receiving answers to questions from Libra, the European VP still believes more needs to be done given the dynamism of the crypto industry. He said,
“However, as Libra is still a project, and thereby a moving target, the information provided remains insufficient for determining the precise nature of Libra and, by extension, its relation with existing EU law.”
Furthermore, Valdis stated that stablecoins poses risks suggesting the authorities set up a “clear and proportionate regulatory and oversight framework” for the assets. So far, the commission is collecting information from the public in open sessions that will be available till 19 March 2020.