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House Democrats draft bill to keep big tech out of financial services

As Congress gears up to question Facebook about its cryptocurrency project, House Democratic lawmakers are working on a bill that could ban it.

The draft legislation aims to keep big tech companies out of the financial services industry. The discussion draft is a starting point for potential legislation and lawmakers will likely make changes as they continue examining the issue.

As the draft stands now, it would prohibit Facebook (FB) and other tech companies with at least $25 billion in revenue from becoming a financial institution or issuing a cryptocurrency.

“A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of ex-change, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System,” the draft says.

According to the draft bill, titled “Keep Big Tech Out Of Finance Act,” companies in violation would face a $1 million daily fine.

The House Financial Services Committee Democratic majority put together the bill with the intention of maintaining “a firewall between commerce and banking.” The legislation would apply to companies with $25 billion or more in annual revenue.

Congress taking aim at Facebook’s Libra

This comes as Facebook’s cryptocurrency project comes under fire from Republican and Democratic members of Congress, and after Fed Chair Jerome Powell said the project raises “serious concerns” about money laundering, privacy and data protection.

David Marcus, Facebook’s head of Calibra, is set to testify before a the Senate Banking Committee and House Financial Services Committee this week.

Financial Services Chairwoman Maxine Waters (D-CA) has called on Facebook to halt the Calibra initiative until lawmakers and regulators can examine it.

Ahead of the hearing, the Financial Services majority issued a memo to committee members detailing concerns about Calibra.

“Cryptocurrency exchanges are also frequently targeted by cyberattacks and data breaches,” reads the memo. “To facilitate its cryptocurrency transactions, Facebook intends to manage and hold a detailed digital repository of social, financial, and governmental data, which may further increase their hacking risks. Facebook has had issues with safeguarding its users’ information in the past. For example, Cambridge Analytica, a political consulting firm had access to more than 50 million Facebook users’ private data which it used to influence voting behavior.”

The memo goes on to detail other privacy scandals involving Facebook — and outlines concerns about the systemic risk, monetary policy and national security implications of Libra:

“When considering Libra’s proposed structure, tokens’ tethering to government-backed currencies, and Facebook’s intended global reach for the product, it may be too risky for the Association to be an unsupervised entity without endangering the financial system.”

Facebook did not immediately respond to Yahoo Finance.

Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.

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