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US proposes barring tech companies from offering financial services (cnbc.com)
171 points by Anon84 25 days ago | hide | past | web | favorite | 173 comments

Isn’t a banking license mandatory for a company that offers financial services? And if so, why does it matter what else a company does as long as it lives up to regulations?

If it’s problematic that a licensed tech company is offering financial services, isn’t there something wrong with the requirements for acquiring this license?

Seems to me that if Facebook lives up to the regulations, it should be allowed to acquire a banking license. And if there’s something problematic about this, the requirements for acquiring a banking license should be changed, and applied to everyone.

Perhaps we should start thinking about separation of powers such as modern democracy(eg separation of church and state).

While not directly comparable, it's imo a good place to start. Advertising companies perhaps shouldn't also be selling products (what's to stop them pushing their own product vs someone else's), social media vs banking (a SM can push their Bank, or similar service though we'll, that would be advertising wouldn't it).

This isn't a terribly well fleshed out thought, but hopefully a conversation starter.

This conversation has been going on for a little while already. Elizabeth Warren directly addresses proprietary markets (i.e. participating in you own) in her plan to break up big tech companies[0]. Her argument essentially boils down to either participating in someone else's marketplace to sell goods, or running your own marketplace without being able to transact within it, but preventing the ability to run and participate within a single market.

0: https://medium.com/@teamwarren/heres-how-we-can-break-up-big...

This argument against vertical integration sounds a lot like United States v Paramount Pictures, inc [0], which forced Hollywood to end the vertical integration of the “studio system” [1].

Honestly, I’ve wondered if Apple has deferred manufacturing to Foxconn et. al. just to avoid being ruled a (vertical) monopoly with this precedent.

[0]: https://en.m.wikipedia.org/wiki/United_States_v._Paramount_P.... [1]: https://en.m.wikipedia.org/wiki/Studio_system

Companies can easily get around this.

Instead of Facebook opening the Bank. It'll be zuck first banking national forms a partnership with Facebook Inc. Accomplishing the same things.

Only accomplishment will be that it's harder for the two companies to share their point datasets. Albeit, not impossible.

It is not quite as easy as you suppose. The Bank Holding Company act of 1956 (as amended in 1970) places any company that owns 25% or more of a bank under the regulatory supervision of the Fed. The holding company rules for Broker/Dealers (investment banks and retail/institutional brokerages) are less airtight but not insignificant.

I worked on Wall Street for years, many of the them on the business side. Fed supervision is no joke.

Which means steam couldn't be created now, which is a little disappointing

It's problematic because nearly every platform either grows out of an application or needs its sponsor to build the initial suite of applications on the platform. You can't get past the chicken & egg problem otherwise - platforms aren't useful without applications, marketplaces aren't useful without participants, and nobody wants to bother with a platform or marketplace that isn't useful.

This is pretty easily worked around with a revenue threshold, though. If you own a marketplace where $25 is transacted annually and you want to participate in it, go for it. If you own a marketplace where $25B is transacted annually and you want to participate in it, there're some problems with that. This is already part of Warren's plan.

It somehow feels wrong to tell Apple that they can't sell Apps in their own App Store.

...which shows how ingrained the idea of oligopoly & big business is in the U.S.

There's nothing inherently wrong with forcing Apple to divest their in-house apps. They did it before, when they spun out Claris in 1987. Likely, it would lead to better competitors within those markets than we have now; there was a renaissance in Mac office software after Claris was formed, which unfortunately Microsoft won. Perhaps if Microsoft had also been forbidden from building apps for their own platform, we would still have functioning word processing and spreadsheet markets.

(Though remembering this time period, I can think of another problem: file formats. Having a choice between MacWrite, WordPerfect, Ami, and Microsoft Word was great. Having to share your MacWrite files with someone using Ami was miserable.)

We had a good "word processing and spreadsheet market". But somehow people and companies voted with their money for Microsoft.

No one liked Excel better than Lotus 1-2-3. They picked Excel because it worked best on Windows because it used private APIs and also because they would be sold together.

My dad had quite a lucrative decade as a consultant moving people from Lotus to Excel, and every time he was hired the people hiring him would complain about how they were being forced to move to "crappy Excel" because of the purchasing department.

If that’s the case, why couldn’t Lotus compete with Microsoft on Macs - even though they tried? Excel was a better product.

Just like people love to wear rose colored glasses and pretend that the only reason that Netscape lost was because MS was unfairly competing, forgetting that NS was so crashed prone that it was a point of nerd pride on Usenet how well an operating system could handle a Netscape crash.

There are some fairly strong cross-platform network effects between office software, because of file formats. If you had MS Word on the PC and wanted to send documents to a friend who had MS Word on the Mac - well, there were minor issues around disk formats, line terminators, and file transfer protocols, but generally if you had e-mail you could send them a .doc. If you had Lotus 1-2-3 on your Mac and wanted to send files to colleagues with Excel on the PC, you were screwed. (The major software manufacturers did end up reverse-engineering each others' formats by the late 90s, but by then Office had already won.)

If Microsoft had an edge on Windows, which was the majority of computers, then that would translate into inconvenience trying to use any non-MS product on Macs, unless everybody you dealt with used Macs.

Lotus was slow to move any of their products away from the command line. Excel was on the Mac in 1985. Lotus didn’t come to the Mac until 1991 and when it did, it was awful. Microsoft had years of GUI development experience by the time Windows 3.1 shipped because they were producing Mac software. Lotus and WordPerfect were panned for their early Windows products because they were direct ports more or less of their DOS products, not because they couldn’t get access to super secret Windows APIs.

As far as compatibility. By 1990, Apple/Claris had XTND/Apple File Exchange utilities to convert from Rxcel/Word to ClarisWorks. People knew Microsoft’s formats by then.

The Mac was its own little incompatible island back then with incompatible file formats between Mac Word/Windows Word (though they could be translated), resource forks and data forks, file types as part of the file metadata instead of file extensions, heck even text files used different line endings than either Unix or Windows. Mac users didn’t generally worry about seamless interoperability.

On the other hand, back in the day, Office could open every kind of document under the sun.

Not true, theoretically they'd just have to sell their own products on another marketplace.

They'd divest the resources into Apple Apps Co., which would then be a Apple preferred partner on the app store.

Or offer them at a discount with little to no advertising, which is basically what they did with Orange Box.

Or split into steam-the-platform-the-company and valve-the-games-company - and if that happens I predict half life 3 really will follow.

So basically all grocery stores that sell their own branded stuff as well are blocked?

No. From TFA:

"First, by passing legislation that requires large tech platforms to be designated as “Platform Utilities” and broken apart from any participant on that platform.

Companies with an annual global revenue of $25 billion or more and that offer to the public an online marketplace, an exchange, or a platform for connecting third parties would be designated as “platform utilities.”

These companies would be prohibited from owning both the platform utility and any participants on that platform. Platform utilities would be required to meet a standard of fair, reasonable, and nondiscriminatory dealing with users. Platform utilities would not be allowed to transfer or share data with third parties."

Note the word 'tech platform.' TFA also goes on to illustrate that this effort is essentially identical to trust-busting that has occurred multiple times over the past century when a single company became so large that it distorted an entire market.

Not sure why this is voted down. Amazon is just doing a scaled up version of what Walmart, Price Chopper, Trader Joe's and various other supermarkets have done for decades. Why should Steam and Amazon be barred from doing it if others aren't?

No they're not. All of the grocery stores are engaging in "white-labeling" - buying products from other manufacturers and putting their own label on them. It would maybe be a valid comparison if Price Chopper took in 50% of all grocery dollars spent in the US, saw what was popular, cloned those products in house and then used the top 80% of shelf space to prominently display their product, and moved the third party competitors to the very bottom shelf.

Additionally, Trader Joes ONLY sells white-labelled products, so it is even less applicable than your other examples.

> Additionally, Trader Joes ONLY sells white-labelled products, so it is even less applicable...

Their mix is heavily skewed toward private-label products, but "ONLY" is not accurate.

To pick one example: they sell name-brand beer alongside their private labels.

Fair enough. They also don't slap a Trader Joes marque on the produce they resell.

isn't the line between white labeling and competing with cloned products blurry? How much of the manufacturing/creation process must they own for it to no-longer merely be a white label product? Lots of companies contract out manufacturing and it's not automatically white labeling in those cases.

You're right. I think the distinction comes down to companies like Amazon having the kind of vast capital required to not only cut out the middle man but to _become_ the middle man in their own market.

In most cases, a market (in the specific sense, like a store or a site) will white label a product and undercut competitors by leveraging the volume/wholesale pricing that they can get. What's truly dangerous about the AMZNs and GOOGs (and Standard Oils and Ma Bells) of the world is that they can use brute monetary force to buy or subsume competition. To quote the legendary SF grifter Jack Black, "You can't win."

Thanks for letting me know.

Good point. There's a precedent for separating industries when it's in the public interest [0]. I think the argument needs to be that housing both industries under a single roof creates a conflict of interest that's too strong to be managed through normal regulatory actions like fines.

[0] https://en.wikipedia.org/wiki/Separation_of_investment_and_r...

There's also a precedent for preventing companies with a monopoly in something from expanding into other businesses, like Bell. Clearly facebook isn't a recognised regulated monopoly like that, but there are similarities.

Right now it seems we are heading for the CHOAM company. (Fictional company in the Dune 'verse that does everything.) I've joked that Amazon is CHOAM and SpaceX is Weyland-Yutani (from Alien).

There do seem to be consolidation / de-consolidation cycles in business though. In the 1980s people also talked about the birth of EverythingCorps. You can see it a lot in 80s sci-fi. In the 90s you had the opposite trend.

We seem to have both trends concurrently right now: institutional investors push for clean sector separation, when they expect sector A growing they want to be able to buy into companies in that sector with as little baggage in sector B as possible and vice versa. Consequently, "the old tech corporation" (Siemens, Philips, GE) seems to be in a permanent state of shrinkage by spinning out one field after another. At the same time, "new tech" corporations are still growing faster than any sector purity investor agitation could keep up with, some even still under the control of founders so that the entirely different logics of personal empire-building apply.

How about then Amazon becomes the state, viola (sic) state controlled production, give everyone an equal share and we have Communism!

You joke but this is sort of what Marx actually argued. Revolutionary state dictated communism was mostly Lenin. Marx thought capitalism would evolve into communism.

> Perhaps we should start thinking about separation of powers such as modern democracy(eg separation of church and state).

I think it should be in a complete different way: finances should be separated from the state so new financial initiatives based on tech (e.g. Libra, Crypto assets) can be free in the same way that Internet gives us freedom to create decentralized initiatives that cannot be stopped by states.

This does not mean that the state is not able to enforce laws against the financial or technology scams in the same way it has laws against pedophilia that cover what church members do.

So Walmart wouldn’t be able to sell Great Value products. Same with Safeway for signature select. Amazon basics... Kirkland...

I don’t think banning vertical expansion is a very good idea. It’s worse for consumers because you’re taking all of the extra efficiency gains out of the market by eliminating the friction between layers.

The argument that vertical integration harms consumers typically follows that vertical integration lowers competition and choice by either coercive means (e.g. block pricing by Hollywood studios) or by undercutting competitors only until they go out of business.

So should Apple not be allowed to sell Apple products in Apple stores because it also sells third party products? Should the console makers not be allowed to produce and sell their own games in their own stores? Should Amazon not be allowed to both produce their own content and sell third party videos?

I was under the impression that the EU outlawed such practices as part of their anti-trust laws.

Many tech companies are also in the business of advertising. It seems clear to me on the face of it that combining an advertising company with a bank is a fundamentally bad idea and would be a clear conflict of interest. An advertising company that "knows where you click", serves you customized ads and has full access to your bank account information strikes me as a step too far.

I agree that even today companies like Facebook, Amazon and Google have way too much of this information already. A move like this may be the first step into teasing some of this data apart and, ideally, preventing one company from collecting it all.

>An advertising company that "knows where you click", serves you customized ads and has full access to your bank account information strikes me as a step too far...

Here's the thing though, you realize you just described Walmart right?

I mean, the HN crowd probably doesn't overlap much with the market that Walmart serves with their financial services, but it's actually a significant portion of the american populace. For them, Walmart is the marketplace, the ad firm, and the financial services provider all in one.

So what everyone's asking is:

1 - why is there no attempt to go after Walmart? or big finance?


2 - why are we doing this anyway, because what we really want is a HIPAA-like law criminalizing the sharing of personal data for commercial purposes? Such a law would be more simple, and would stop more privacy violating behaviors in their tracks.

These are very reasonable questions, given the assumed intent of the proposed legislation.

I agree, those are both good points!

Ideally this legislation would also prevent Walmart from minting their own currency or opening up their own bank (conveniently placed in their stores and available on their website). My understanding is that Walmart is more like Amazon-plus-physical-stores at this point; they do not yet provide their own bank. If they did, maybe they could be cast as a "tech company".

IMHO, the concern over privacy is _my_ concern; I'm not sure it's something this piece of legislation is worried about. Based on the article it seems like the concern here is more about Facebook creating their own currency and less about consolidation of people's private data. I would guess no one in government likes Bitcoin much and it's one saving grace is it's lack of widespread popularity among the general population. Facebook could conceivable make Libra so easy to use that it could turn into a real thing.

Walmart doesn't own its own bank, but in Arkansas, I've seen this bank next to and within Walmarts:


which is owned by the Waltons. They only seem to be in Arkansas though, which is less scalable than the entire internet.

So by disallowing Walmart - that caters to a lower income demographic - from operating financial services, how is that going to help the same underserved population that the banks don’t want to cater to?

> 2 - why are we doing this anyway, because what we really want is a HIPAA-like law criminalizing the sharing of personal data for commercial purposes? Such a law would be more simple, and would stop more privacy violating behaviors in their tracks.

A thousand times yes! I am a free market kind of guy and your proposal fits with that philosophy because while I might do business with <some credit card or bank> I am not doing business with their “partners.” And, the term “our partners” that come with the privacy policies is so nebulous as to be worthless. Does <some bank> have a partnership with a flower delivery service? Maybe, I have no idea and no reasonable expectation that they do. So why can my data be sold to such out of scope “partners” under a generic consent. I should have the right to consent to each and every specific partner that the institution wants to sell my data to.

The problem is no company wants that as they would essentially be required to publicly reveal their entire web of business partners, which is generally closely guarded as a source of competitive advantage.

This is the Great Asymmetry, as it were. They want to be able to invade your privacy and capitalize on your information, but will raise all Hell against being forced to reveal anything that could give anyone else a leg up on them.

Until this is reconciled via either a return to a non-invasive business environment, I.e. companies collect only enough state to do business with you, and the norm is not to data share, or companies are forced to explicitly reveal who they are doing business with in order to get explicit permission, abusive data harvesting/sharing will win the day.

Oooh nice. I see you have a large sum in your account, how about a new car? I see lots of cc charges from designer stores - have you seen this one? I see your regular paycheck from your employer have stopped...

Chase does this today.

> Isn’t a banking license mandatory for a company that offers financial services?

No, banking is a subset of financial services, and not all financial services firms are banks.

PayPal is a good example of a financial service company that’s not a bank.

Thats not 100% true. Paypal may very well own a bank, or at the very least cooperates with a bank, to stay in compliance with some of the services its offers.

Financial services companies are often a complex arrangement of licensed and/or white-labeled services that are necessary to maintain compliance with regulations in the multitude of jurisdictions in which they operate.

PayPal does not have a banking license so they must partner with banks to other some services. Similar to Apple offering 0% loans on iPhones with Citizens or loans with interests for Macs using a Barclay credit card.

While a little off-topic, since this is an article about the US, PayPal does have a European banking license: https://web.archive.org/web/20161122071031/http://www.e-coml...

But they need a license, right?

PayPal is a money transmitter, which requires a different federal license than a state or federal banking license.

There are many different sorts of financial services licenses both at the organizational and individual levels: banking licenses, broker-dealer licenses, investment advisory licenses, money-transfer licenses etc. From different federal agencies, state regulators, or industry associations. You can do certain things given certain licenses or be prohibited from doing certain things. Some licenses are granted to companies. Some to individuals. Plus, there are a blizzard of non-license based regulations covering a wide range of financial services activities.

It's not necessarily problematic that a tech company gets a license. But I think that some services require that officers of the company have specific licenses, which may be an issue. Or that the company have certain safeguards in place. Or certain communications (or communications blockage) structures. Etc. The regulations are fairly complex and intensive -- I suspect even many larger tech companies would be leery about entering this minefield.

For whatever a banking license doesn't cover, requiring more regulation/oversight doesn't seem unreasonable to me, but straight up keeping tech companies out is silly. Smells like big financial institutions are probably lobbying to keep the new kids out of their sphere.

They know what they are protecting. The financial institutions pocket 20% of global GDP by providing very simple, cheap & easily automatable services, from a tech standpoint.

Banking licence is only needed when you're dealing with traditional currency, not when you are making your own currency. Starbucks card, digital game companies are all examples of a currency.

While I’m not disputing your facts, I’m curious how that lines up with the fact that (IIRC) gift cards are considered loans. That was the crux of how RadioShack argued that filing bankruptcy allowed them to invalidate outstanding gift cards.

No, because there are intermediaries that allow non banks to use their tech, like venmo/paypal acts as a broker, and therefore has access to all the banking services they need to run their money around. And they are very careful to stay in that definition so they don't have to deal with bank regulations. I believe Vice media did a good interview where they cover this specifically.

In today's age, can we make the distinction between a tech company and a non-tech company? How many B2B digital services does JP Morgan Chase offer, how many consumer-facing digital services? Does that make them a tech company as well as a financial institution?

I think this may be a knee-jerk reaction to the rise in crypto-currency adoption, and Facebook's launch of Libra.

Rethinking it, this could also be taking aim at Amazon.

Also, it seems like this would make relatively sensible financial services from tech companies harder to get. Apple Pay/Google Pay, for example. A smartphone company is a perfectly logical choice to push for smartphone-based payments. I don't think that's the kind of thing we'd want to regulate away.

Sometimes, vertical integration can be a good thing, because for some spaces the alternative requires so much coordination that it's awkward and clumsy. If you look at Tesla's supercharger network, for example. The very fact that there are no really serious competitors yet that are not tied to a specific brand of electric car demonstrates how lack of vertical integration can be a major impediment for chicken-and-egg-type problems. And while I'm sure there eventually will be, just having Tesla out there in the forefront is useful as a leading example.

My favorite (ridiculous) quote about the blurring of what exactly is a tech company:

”Moxy...will be a technology company that just happens to fly airplanes”


UPS: we are a tech company masquerading as a shipping company.

From even the small scale that I use to work at - routing field service workers (cable installers, propane deliveries, alarm company installers, etc) efficiently is a “hard problem”. On the scale that UPS operates it takes a lot f technology.

In my experience, nearly everyone is a tech company, but the ones that admit it to themselves and others tend to be better at it.

FANG aside, I feel like purebred tech companies are more likely to deliver what people want as opposed to existing financial institutions that are interested only in keeping up (in the ultimate minimal sense) with what other companies show is possible.

I once worked at an online college that claimed to "not be a tech company". I replied, "if your website goes down then where will people go to take classes? How will professors interact with students?" They didn't get it.

It's a pretty ridiculous solution for a real problem IMO. I'm leaning towards tinfoil-hat on this one. This proposal exists for some other nefarious reason.

Well yes, if the "nefarious" reason you suspect is to gain easy political points.

Why wouldn't they just look at regulating the product side (ie the actual services like crypto currencies) on their own merits and not discriminate against who provides them?

Presumably car manufacturers are also “tech companies”, along with online-only banks + lenders.

Google is a heavy investor in Credit Karma if memory serves.

The title is incorrect.

“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,”

Its specifically targeted at currencies (libra and perhaps things like xbox points?). Not all financial services.

A closer to correct tile would be "US proposes barring tech companies from offering currencies"

I work in FinTech and I love this idea. Banks and other Financial institutions have incredibly strict data compliance and personal privacy laws that preclude them from using customer data the same way the current large tech companies do (facebook and google specifically). The laws limit both the type of advertising including the language and representations/disclaimers, as well as the scope in which their "sales history" can be used or distributed to other vendors/firms/partners.

This type of service flies directly in the face of the Google and Facebook's business models, there is absolutely a good reason to fear how these advertising giants will abuse customer financial data. These services MUST be kept separate for the health of society.

On a personal note, Facebook was just used to overthrow the democratic process in the US and the UK, possibly in other nations as well. They certainly need to demonstrate the ability to control their existing products before they are given even greater responsibility.

I love what David Marcus is doing and the idea of a crypto currency can do the world a lot of good. But not in Facebooks hands or in the hands of any other advertising giant.

Not long ago Facebook was praised especially in "White" countries media on how Facebook was helping establish "democracy" in "third-world" or "non-white" countries. Tired of this 'not in my backyard' mentality' of US polity.

You're assuming that the same people are doing the praising and complaining. In my experience, the people who don't like Facebook, don't like what they are doing anywhere. The people who like Facebook, who I assume are mainly those with a financial interest, are pretty happy about Facebook in general.

Ah yes, as a longtime Wells Fargo customer, I am aware how great financial institutions are with their customers.

The financial services industry sees an existential threat. So they respond with lobbyists.

financial services industry? try the governments of the world. a currency outside of their control that is supported by a well known agency, in this case its obviously facebook, would be just another nail in the coffin for them.

look, government, namely the politicians, all truly upset that the facebooks, google, and more, of the world, give anyone the opportunity to get a message out. decades ago the politicians could reliably count on the press of their nations to always pony up.

they have lost control of the message mostly, they are trying to claw it back under the guise of protecting privacy , elections, children, and puppies. they damn well will get in front of any attempt which could affect their control over any means of wealth transfer. even regulated and taxed they would lose manipulation of currency to implement policy.

Yup, I wonder how much of this has to do with the advancements and progression of blockchain technology.

So then would financial services companies not be allowed to offer tech services?

And what, precisely, is a tech company? How is that unambiguously defined?

The worst part is who cares anyway?

Think about it, why are we targeting tech? If having tech mix with finance is bad, shouldn't we disallow finance companies from offering tech services?

If it's not bad, then why are we doing it at all?

This really sounds like these politicians are once again doing too much of something no one asked for, and nothing at all about what we did ask for, privacy protection.

All they need to do is make a HIPAA like law that criminalizes any sharing of personal data at all for commercial purposes. With mandatory prison sentences for offenders. That's it. Do that and you stop all kinds of egregious privacy invasions in their tracks.

That's a really simple ask, and yet they won't do it. It's starting to get a little infuriating. No one cares about whether paypal or ebay offer a prepaid debit card or whatever. Anymore than anyone cares about Walmart offering prepaid debit. We want to make it illegal for ANY of these companies to share information. Full stop.

Why can't these people do such a simple thing that makes a whole lot of sense? The EU has protections. Even the AU has started drafting the privacy protections regs for their new zone. Why can't we in the US do that same, very simple, thing?

Worst part is now instead of having to worry about what ebay, paypal, and amazon are doing with that data, I have to worry about what thousands of anonymous smaller vendors are doing with my data after they purchase it. In a very real way, these politicians are turning what was a 9mm round flying at me, into a shotgun blast...

and then saying, "Hey don't thank us!!!"

Don't worry I won't.

The politicians wont do it and the populace won't like it because tech companies have become a significant part of the economy and are a significant driver of economic/retirement account growth and international political power in the USA for the past 20 years.

If you’re in CA you could try to start a referendum.

From TFA

> The draft legislation, “Keep Big Tech Out Of Finance Act,” describes a large technology firm as a company mainly offering an online platform service with at least $25 billion in annual revenue.

Don't banks themselves offer an "online platform service" - i.e. online banking, trading, etc?

arguably not 'mainly' though

Etrade? Ameritrade? Robinhood?

Etrade and Amertirade are registered financial institutions.

Robinhood is reselling financial services from another registered financial institution.

Can Apple be seen as a tech company by that definition?

This legislation is clearly aimed at Apple. Today Apple Pay and a Goldman Sachs credit service. Tomorrow a credit card offering if their own to compete with other Eurocard/Visa/MasterCard services.

There’s a lot of money on the line.

> This legislation is clearly aimed at Apple.

Really? Because I was under the impression that they're more worried about companies minting "currency".

I guess it’s a bit hard to accurately target the legislative equivalent of a nuclear bomb.

It seems to be clearly aimed at Facebook.

Facebook is only establishing an alternative currency, which major banks will be participating in if it gets off the ground.

Libra is not a threat as long as Facebook plays well with regulators and various nations’ tax offices. In addition, Libra will be run by a spin-off company, not directly by Facebook.

Apple is potentially going to cut EMV out of the loop.

Like Paypal?

There isn't a definition provided for platform utility in this bills text, but the first mention I saw of the "platform utilities" term was from Warren, which was referring to select category of companies with this definition:

  Companies with an annual global revenue of $25 billion or 
  more and that offer to the public an online marketplace, an 
  exchange, or a platform for connecting third parties would be 
  designated as "platform utilities."
It looks like PayPal is at around 13B in yearly revenue so they would 100% not be included for revenue bar alone, but not completely sure how I would read if they fit into the category based on the rest of the definition.

A limit of $25 billion in global revenue? This reads like legislation drafted by large banks to secure their moat against newcomers with enough heft to actually make a dent in their market share. I don’t think this will facilitate competition or protect the consumer in any meaningful way.

$25B is the point that Warren has been targeting for a few months now, not just for banking-related services. She says that at $25B, the company is sufficiently large that they control a significant portion of whatever industry they are as well as the economy and people's lives. The goal is to target companies with too much influence and reign them in with regulations and/or breakup. Again, this number is being used for any industry, not just banking and tech (though tech does seem to be the focus at the moment).

Paypal's revenue is more around 15B currently. So, not yet.

PayPal’s revenue is ~$15B, but your point is sound.

Or any large member of the ACH network.

It's weird though, because something like ACH desperately needs to be replaced. It's slow, and compared to whatever they have in the EU, it's slow and embarrassing. Not saying it needs to be blockchain (I'd prefer it isn't), but taking lessons from it would be beneficial. In the past ~30 years, the American business ecosystem cares less and less about standards and more about pushing their own standards/formats and not giving a fuck about interoperability.

Same day ACH is available if you have a bank that supports it. My small credit union has same day (and free) ACH if I get it in by noon.

The new EU SEPA system launched in 2017 has 10-second settlement and it's available 24/7.

You're not going to compete with Venmo, PayPal and Libra with "same day if I get it in by noon"

Zelle has instant settlement for banks that use it, including two of the three banks I use.

ACH goes through the FED before it is processed by the receiving bank. Is SEPA sent to the ECB before clearing?

I’ve worked in Fintech for 6+ years. Banks are dinosaurs and the US banks are terrible at adopting new processes/tech.

In the US we are in a standard war with ACH, Zelle, and other payment schemes fighting for market share.

The proposed definition is in the article.

Banks are going to love this. It's called regulatory capture: https://en.wikipedia.org/wiki/Regulatory_capture

Less threat of competition just means their margins get to stay high. I'd rather be looking for ways financial regulations can encourage more players to enter the market.

> “Such a sweeping proposal would likely spark opposition from Republican members of the house who are keen on innovation”

Is this true? I would assume Republicans are more interested in protecting big bank interests

There are a lot of republicans: don't paint them with a wide brush. Republicans are in favor of small government - (less so now that they have power). The large number who believe small government even when in power are not in favor of big banks which have mostly got by exploiting government regulations that republicans oppose.

Remember though, the above is the generalization of one significant group of republicans. There are many different (overlapping) groups with different beliefs.

> Republicans are in favor of small government

“Small government” is rhetoric Republicans use when Democratic priorities for government (social services, etc.) are being discussed; it evaporated when Republican priorities for government (military, law enforcement, etc.) are discussed, and even when Republicans have full control of federal policy you don't get smaller government, so the idea that they are for it in any way other than as a occasionally-convenient rhetorical dodge around discussing particular issues is not well supported by evidence.

> The large number who believe small government even when in power

I believe you are talking fiction here. They don't institute small government when in power because the campaign rhetoric about small government that they use to get elected is completely infeasible. Add to that that there are usually many forms of spending which would be controversial to their campaign rhetoric were it logically consistent, but they like.

Don't confuse the rank and file voters for those elected. There is a lot of frustration. Politics is complex.

You said "when in power".

I humbly suggest I have been watching this trend for decades and am not confused about this disparity. The voters you are talking about by and large get suckered in by infeasible promises. Sometimes the elected officials are true believers who only fail once the reality of the situation sets in. Other times it's active deception.


> There are a lot of republicans: don't paint them with a wide brush.

I'm sorry, but no. Republicans are republicans the same as Democrats are Democrats. These parties have their own priorities and most votes fall along party lines anymore.

you could switch out Republicans for the word Conservatives and it would be more accurate.

I'll accept that, though I'm not sure I agree.

They must feel heavily conflicted.

I understand the sentiment but have no idea how this could be carried out. What happens to gift cards? What happens to in game digital currencies, what happens to ad accounts, what happens to AWS credits.

I'm not an economist and really don't know how to articulate this well so forgive how dumb this might sound.

I think the difference is if the financial component is the product. All of those things, Steam wallet, Ebay, etc. are all trying to use the money moving tools to sell products that aren't money. Your Steam wallet cannot be used to give someone $20USD who can then go spend it on Pop Rocks. Ultimately it all funnels into buying games.

When your product is the money storage, transfer, removal services, that's when you become a "financial service."

Anything directly exchanged for money (like a gift card) is subjected to a patchwork of laws in the US. Unused funds are considered "breakage" and the merchants love it.

Some states prohibit fees while others require the breakage to eventually go to the state itself.

"Loyalty" rewards that are 'earned' or awarded are less regulated. Hence the airlines miles that expire.

They can fine tune the law as much as they want

If they'd make a simple HIPAA-like law that just criminalizes outright the sharing of personal data for commercial purposes, we wouldn't have to worry about fine tuning to catch privacy corner cases. No one even tries to wiggle or weasel out of HIPAA violations because the law is simple and none of the big shot hospital CEO's want to spend any time in prison. All the hospital employees are well aware of what will happen if they violate a patient's privacy as well. We need that same thing for all personal data, not just our medical data.

Perfect example of politicians giving us truckloads of junk we never asked for, like this "Keep Big Tech out of Toilet Paper Printing" or whatever, while at the same time giving us absolutely no part of what we do want, privacy protection.

> If they'd make a simple HIPAA-like law

So, I've been working fairly intimately with HIPAA for close to 20 years, and I have to ask: on what planet can a law both be “simple” and “HIPAA-like”, even if you are only talking about the original 1996 Act and not all the subsequent additions?

> No one even tries to wiggle or weasel out of HIPAA violations

Yes, they do (well, for privacy violations, not, say, the Administrative Simplification side, but only because that side isn't enforced with any seriousness so they don't need to bother.) That's why we got things like HITECH to make that harder.

Look man, I've worked intimately with HIPAA for a long time too. (Full disclosure, I've taken medical imaging companies public before. My SO runs a swath of hospitals down in Texas.) The reality is, dealing with the FDA side of things was about 15000 times more complicated for us than HIPAA compliance. I'm pretty sure anyone who's ever shipped a medical diagnostic product would call HIPAA compliance simple compared to what the FDA puts their products through. The regulatory affairs people at most medical companies are FDA compliance experts that know how to comply with HIPAA, rather than HIPAA experts that some how penetrate the FDA requirements. There's a reason for that.

> The reality is, dealing with the FDA side of things was about 15000 times more complicated for us than HIPAA compliance.


> The regulatory affairs people at most medical companies are FDA compliance experts that know how to comply with HIPAA, rather than HIPAA experts that some how penetrate the FDA requirements.

Well, yeah, the Health Insurance Portability and Accountability Act of 1996 is centrally a law regulating insurance provision whose rules and regulations most significantly impact payers; the parts impacting providers (while there is some compliance effort required, particularly regarding privacy and security) were actually designed to reduce the burden on providers; the privacy/security elements of HIPAA were included to mollify fears about the incentivizing and standardization of electronic billing transactions, they aren't the central focus of HIPAA though they are the part that (now that the “number of the beast” fearmongering has faded) remains in the public consciousness.

EDIT: And even then, the HIPAA privacy rules aren't all that simple; if you want simple privacy rules, the rules for privacy of federally-funded drug and alcohol treatment patient data are much simpler, and also stronger privacy protections.

I do think part of the reason that health service companies and insurance companies adhere to HIPAA is because it helps them keep their customers "locked in" to their product. It is often used as an excuse to prevent the digital transmission of health care data from one provider to another ("they gave me a CD with my data to give to my new doctor") and to prevent people from leaving "the network". These are companies that have very real incentives to avoid sharing data with each other, indeed, the more data each holds hostage the more powerful it becomes (hence the consolidation in the field).

That seems very different to me from how advertising companies function and make money.

Perfectly put.

> "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,"

Define large, platform, and utility please?

They do define large as 25bil.

This definition has serious issues if nothing else.

Isn't it normal to be vague when writing laws in a "common law" system like the US? I thought the practice was defended with the notion that judges will have to interpret the spirit of the law, having some flexibility with unforeseen cases. It has its pros and cons, but it seems to be an explicit design decision in the system of laws.

not a lawyer, but there is 'vague allowing room for interpretation' and 'so vague it cant be interpreted'

Well, this isn't that. The interpretation may vary slightly, but there are definitely established meanings for "platform" and "utility" for a judge to work from (though "platform" might be only the plain-English meaning, "utilities" such as power and water companies are a regulated category which can be used for reference if nothing else).

So you simply start a different company unrelated to the tech company. Similar to the tarrifs.. Apple gets an excempt because it cannot get their parts anywhere else; because they are Apple-specific parts, manufactured there.

Governments need to take a look outside their bubble and see that they are loosing power to global companies.

> Governments need to take a look outside their bubble and see that they are loosing power to global companies.

Look, I know Hanlon's razor and all, but thinking that there's no complicity between the US government and US companies (you say global, I say US because FAMGA, in this case) is wishful thinking.


GAFAM rolls off the tong a little better and what the french use (pretty funny article about them on the french wikipedia [0])

[0]: https://fr.wikipedia.org/wiki/GAFAM

I'm Italian, so neither really sound weird to me :)

nations are becoming obsolete. soon it will be a william gibson world

I find these laws that make BS criteria like "Above X billing" to be a grotesque violation of the rule of law.

Clearly they want to apply rules to a specific company, but it would be too crude to say "FANG" and create criteria that apply only to the "FANGS".

I wish the Constitution prevented laws from discriminating on the basis of size or industry, the law should only be able to determine what conduct is or is not permitted.

How would you deal with antitrust?

Don't require being a monopoly as a condition, just regulate anticompetitive behavior. For instance, I think it is a flaw that Microsoft is prevented from bundling a browser on Windows while Apple gets off Scott-free for much more egregious behavior on iOS.

This makes so much sense if it's actually possible. It also means we can keep useful companies like Amazon around while keeping them in check.

I'm curious where they draw the line for "company offering financial services". Even if Facebook falls into the big online tech bracket, they explicitly wanted Libra to be a separate entity. In the extreme case, they could hand over Libra completely to other companies and deeply integrate as a payment system/wallet for Libra that they have "no control" over.

From TFA

“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,” it proposes.

So it’s specifically targeted against Libra.

I don't understand it this way. Facebook is the platform and it can organise Libra in a way that it doesn't actually operate or maintain the cryptocurrency itself.

I'm assuming that implementing a wallet is not part of operating the currency.

I wonder if Calibra is made into a non-custodial Bitcoin wallet and integrated into Whatsapp instead... does that count as "offering financial services"?

Absolutely. The US needs to protect the banks and Visa

While I don't want Libra at all... the framing of this is pretty absurd and overly broad, having not read the proposed legislation.

That said, given the path that technology as a sector has taken to censor and deplatform people based on their political alignment, I'm not sure I'm really supportive of any potential currency exchange that does not stay out of any discussions of legally protected speech. I don't agree with most of those that would be cast out, but potentially not being able to pay for housing, utilities, bills, taxes or buy food is a pretty big deal.

I would be okay with them adding some oversight for online mortgage brokers. I was recently shopping to refi my home and it is dark and shady shopping for a mortgage online. Even the bigger name brokers like Loan Depot, Better, Amerisave, Rocket Mortgage were pushing documents through stages that they had no right to and were attempting to have me sign my wife's name. It wasn't just one-off, it seems to be the standard operating procedure for them.

Huh? It seems every second company that has a website now tries to be a financial middleman, not even counting the cryptocoins. Open an account with McBank to pay for your burger! Oy, we now have a bazillion of customers' dollars on our hands, that we get to hold for five minutes each. Better invest them in the meantime, I guess.

Anyway, the quotes in the articles are so vague that they have no chance or regulating anything.

Retail has been doing this for a long time. Every single retail store seens to have their own credit card.

Sears, the original amazon, offered many financial services.

Sears -> Discover (founded) H&R Block (located in stores) Dean Witter (acquired) Allstate (founded)

In the interest of discussing the actual proposal and not the headline of this article, here is a link to the draft:


If Facebook’s Libra is successful, it would benefit every American tremendously by strengthening the American Dollar. Up until now the USA’s main export has been the American Dollar.

it seems that the US financial regulations are 1 big mess of patches. (For an uninformed outsider like me). For example are onion futures are made illegal, The Pattern day trading rule seems strange, gift cards etc. it seems problematic that there is a need for creating very specific regulations when it’s about financial services. This seems way too specific to be able to uphold and cause uncertainty for startups. It is not possible to create a more broad regulations?

Consumers should decide whether they use the banking services of tech companies, not politicians or regulators.

They would finally be able to take care of Paypal.

Would $1M per day be a large enough penalty to discourage Facebook from pursuing Libra?

For comparison, MasterCard's annual revenue is $12.5B.

I wonder what the specific worry is? Anti-trust? How is this different than being a different payment network?

Where does Bloomberg fall in this? They're a tech company, but they're also a financial company.

But their revenues are less than $25B, which is the arbitrary limit set in this proposal.

but they aren't one of the evil ones, apparently

Robinhood is a tech company which offers financial services. What does this bill even mean?

It's easy to ridicule this post, as this comment section demonstrates, but there's a point hidden behind the apparent ignorance insofar as cnbc has reported it.

Startup culture has demonstrated that they are uninterested in following and very interested in subverting long standing regulations that exist for good reasons.

It's not clear how to solve this problem, and there's a certain quasilibertarian bias that legitimizes it, as the federal register is incomprehensibly large, such that only long established networks of expensive lawyers can wrangle it, which stifles innovation.

The difficult part, however, is making the case that innovation ought to happen in this space anyway.

>>subverting long standing regulations that exist for good reasons.

Do you have evidence that they exist for good reason? It seems to be central economic planning, based on the delusional idea that cookie-cutter rules designed to regiment every class of interactions will preempt misbehavior and promote socially beneficial behaviour.

The opportunties for special interests to stifle competition with regulations are replete, so there are many explanations for regulations existing besides their being in the public interest.

let's keep financial services in the hands of Wall Street, where everyone is very reputable and well-intentioned

Wall Street just takes advantage of any financial advantage they can get their fingers on no matter the casualties.

Tech companies like Google or Facebook are actively trying to shape your opinion. Must have been an ingenious move they made to look worse than Wall Street in a few years.

edit: The unpersoning they have committed isn't a viable strategy in the financial industry. Even if players like Mastercard have fallen into that trap. But I wouldn't trust them with a penny.

quite a few large investment banks have the refrain that they are technology companies first. will this impact them?

Would this also affect Visa and MasterCard?

I have met engineers from Visa and American Express and they are as knowledgable as their counterparts in the said "tech companies" and do work on bleeding edge tech.

In other words, the proposition to bar tech companies from offering financial services is a joke. How can you tell what a tech company is? Every company uses tech in some way shape or form.

This ^

It seems very particularly targeted at Libra. I don’t think it’d effect either company.

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