With Facebook’s announcement of their upcoming blockchain-based cryptocurrency called Libra, the financial sector has begun to take a vested interest in what Big Tech is doing to disrupt their industry. Mark Zuckerberg, CEO of Facebook, has gone on record, calling the financial sector ‘stagnant’ and intending to change that through this cryptocurrency. From any other quarter, the complaint might be dismissible. Coming from the operator of the largest social media website in the world, the claim carries quite a lot of weight. Facebook, along with their partners in the Libra Consortium, have the financial means and methodology to create a cryptocurrency that could potentially destabilize the financial sector.
The Pushback Begins
Not being an industry that takes threats lightly, finance businesses have already started lobbying legislators to put frameworks in place to protect their livelihood. Small lenders have previously urged lawmakers to introduce bills that limit the ability of Facebook to create and utilize a new cryptocurrency, citing it as sidestepping regulatory frameworks. Facebook, however, is not the only threat to the hallowed halls of finance within the US.
Japanese e-commerce firm Rakuten attempted to set up its own bank within the US earlier this year. Bank trade groups were quick to fire off letters to the Federal Deposit Insurance Corporation (FDIC) to remind them that Rakuten shouldn’t be able to benefit from federal insurance. Rakuten’s failed strategy has outlined that the banking sector is dedicated to ensuring that the tech disruption of their industry fails before it even gets off the ground.
Partnerships over Competition
Many of the Big Tech firms have decided against competing with the financial sector. Google and Apple are backing a Federal Reserve-led initiative that allows for the speeding up of payment processing, much to the chagrin of Wall Street firms. The biggest problem within the financial sector today is how complacent they have become in their position. The more they try to use politics to fight their innovation battles, the harder it will hit them when they lose out to more innovative firms.