The European Central Bank (ECB) has published significant warnings over the role of big tech in cryptocurrency firms.
Commenting during his speech at a digital event hosted by Brussels think tank Bruegel, Fabio Panetta, member of the ECB’s executive board and chair of the task force on a ‘Digital Euro’, highlighted the importance of monetary sovereignty as big tech firms become increasingly involved in currencies.
He stated: “The global tech giants – or big techs – are setting the pace of change in the provision of financial services in various ways. They are seeking to sidestep traditional distribution networks – including payment systems – through their control of social media, online marketplaces and mobile technologies.
“This could lead to the rapid and large-scale take-up of the financial services offered by big techs, both domestically and across borders. Big techs are also seeking to expand the reach and improve the quality of financial intermediation through the large-scale processing of proprietary consumer data generated by their core activities. They could use such data to reduce the information asymmetry that lies at the heart of financial intermediation.”
The governance of Big Tech’s involvement in cryptocurrencies hit the headlines in 2019 and 2020 as Facebook launched beta testing of its ‘Project Libra’ crypto monetary policy.
Initially cited as a key technology project by founder and CEO, Mark Zuckerburg, Facebook, was forced to downgrade the project as the US FCA accused the Silicon Valley giant of ‘breathtaking arrogance’ in attempting to launch a monetary platform without any regulatory oversight.
Meanwhile, EU financial bodies have stated that whilst all member state treasuries acknowledge cryptocurrencies as a future business discipline, the EU has yet to formalise its statutory rulebook on directives and standards governing crypto transactions.
On the potential impact of the growth of data, he added: “Data-driven models could jeopardise privacy and pose the risk of personal information being misused. Moreover, integration with other services provided by big tech companies may threaten competition through tying, bundling, cross-subsidisation and winner-takes-all dynamics.
“This could crowd out traditional intermediaries and reduce competition in financial markets, limiting consumer choice. In Europe, the expansion of big tech companies could make us dependent on technologies governed elsewhere. Finally, big techs may contribute to a rapid take-up of stablecoins both domestically and across borders, which could create systemic risks and even endanger monetary sovereignty.”
