How Crypto Bills Could Hand Big Tech the Keys to Banking

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n Wednesday, the STABLE Act, a pivotal piece of legislation regarding stablecoins, moved forward in the House Financial Services Committee. This progression raises the chances that Congress might pass a law this year that solidifies the role of stablecoins as a significant global financial instrument. Advocates claim that stablecoins play a crucial role in maintaining the dollar’s status as the world’s primary currency, while also facilitating more efficient, affordable, and secure transactions for people across the globe.

Despite bipartisan backing for stablecoin regulation, the legislation has encountered considerable opposition, particularly from Democrats who express concerns about potential systemic risks and conflicts of interest. This is especially pertinent following the announcement by the Trump family’s crypto enterprise regarding its own stablecoin. Detractors also caution that such legislation could inadvertently pave the way for major tech companies like Meta, X, and Amazon to develop their own proprietary currencies, leading to further consolidation of corporate influence.

“While this is being positioned as a cryptocurrency bill, it is crucial to recognize that the primary beneficiaries may well be large technology firms,” remarks Hilary Allen, a professor at American University Washington College of Law and a noted critic of cryptocurrency in D.C.

Read More: What are Stablecoins?

Both the House and Senate have successfully moved their respective stablecoin bills—the STABLE and GENIUS Acts—through committee. These pieces of legislation outline regulatory frameworks for stablecoins, detailing the types and amounts of reserves that issuers must maintain. The next step involves reconciling these two bills in hopes of presenting a cohesive version to President Trump by summer. Several banks, including Bank of America, have shown interest in launching their own stablecoins if the legislation is enacted.

However, the current wording of both bills allows non-financial entities to create stablecoins through subsidiaries. Previous drafts had restricted such activities to banking institutions, but neither the STABLE nor GENIUS Act includes these prohibitions. In fact, the STABLE Act permits any nonbank to issue a stablecoin, provided they gain approval from a federal regulator.

According to Allen, this opens the door for tech leaders like Elon Musk and Mark Zuckerberg to launch their own stablecoins. Both have shown considerable interest in the payments industry—Musk’s X has secured money transmitter licenses in various states, while Facebook attempted to introduce its cryptocurrency, Libra, back in 2019, only to face significant backlash and regulatory scrutiny.

“These large tech platforms have a vested interest in payment systems because they thrive on data collection and monetization—and transaction data is particularly valuable as it reveals consumer purchasing behavior,” Allen explains. “As more transactions shift to these tech platforms, it strengthens their already significant influence in our society and places them at the core of our financial ecosystem.”

Allen presents a hypothetical scenario where Amazon issues its own stablecoins. This could lead to widespread adoption among Amazon employees, Whole Foods customers, and Washington Post readers, potentially resulting in a reliance on stablecoins over traditional bank accounts. “This poses serious risks because banks utilize customer deposits for loans to stimulate the economy, whereas stablecoin reserves would remain stagnant,” she says. “Money that could have been actively contributing to the economy would merely sit idle with Amazon.”

Stephen Lynch, a Democrat from Massachusetts, echoed similar concerns during the markup of the STABLE bill, cautioning colleagues that stablecoins could “compete with bank deposits and weaken banks’ ability to provide loans to consumers and small businesses.”

In October 2023, Rohit Chopra, director of the Consumer Financial Protection Bureau under President Biden, expressed that if Big Tech firms took over banking functions, they would have a strong incentive to monitor every aspect of consumer transactions. He also pointed out the potential for developing personalized pricing algorithms.

Arthur Wilmarth, a professor emeritus at George Washington University Law School, noted that consumers using stablecoins might lack protection against fraud. He also referenced China’s experience, where companies like Tencent and Alibaba became dominant players in payments and gained excessive influence over regulators, prompting Beijing to tighten its control and assert influence over those companies’ decisions.