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Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra thinks the Financial Stability Oversight Council (FSOC) should seriously consider regulating big tech companies.
Chopra, a member of FSOC, the financial regulatory board chaired by the Treasury secretary, told Yahoo Finance Live in an interview that he was concerned that the financial industry’s reliance on cloud services provided by big tech companies poses risks that could disrupt payment systems.
“Do you worry that if something happens, it could actually bring down a lot of major financial infrastructure, and what consequences that would have for the economy and society?” Chopra said.
“It’s too concentrated in a few major cloud providers. So ultimately we need to look at resilience, but also financial stability. And to the extent that financial regulators need to act, I think we need to seriously consider that.”
In October 2021, the CFPB ordered six tech companies — Amazon ( AMZN ), Apple ( AAPL ), Facebook ( META ), Google ( GOOGL ), PayPal ( PYPL ), and Square ( SQ ) — to provide information about their business practices. including information collection, policies for removing individuals from the Platform, and policies for managing fraud and resolving consumer disputes.
The bureau is also looking at Chinese payment platforms WeChat and Alipay.
Chopra says that with the rapid adoption of payment apps and services, there are questions around how certain services may decide to kick a merchant or user off the platform or whether they’re collecting data on our phones to move toward personalized pricing.
“We’ve also noticed that, for example, on Apple devices, only Apple Pay is allowed to use nearby connectivity on the device,” Chopra said.
“We hear from other competitors, even financial companies, who want to launch their own competing apps, but they can’t always get in because they can’t use that pipeline functionality.”
“When you can know every transaction that someone has spent, that’s really a map of their mind and their financial life. And I think people want to make sure that’s safe and secure and that they’re only sharing when they want to be.”
While online payment systems like Venmo to Apple Pay have gained popularity among consumers, regulators are looking at stablecoins to see if they can scale quickly. Stablecoins have their value pegged to fiat currencies like the dollar.
Asked whether the FSOC should designate stablecoins as a strategic risk, Chopra said, “At the very least, this could at least give some visibility into what’s supporting these stocks.”
Amid three U.S. bank failures last month, the U.S.’s biggest stat coin-issuing circle briefly broke its dollar streak before recovering.
By statute, the FSOC may designate certain payment activities, payment verification, and settlement as systematic or systematic.
In the year In November 2021, the President’s Financial Markets Task Force recommended that the FSOC identify certain stablecoin activities as systemically important or potentially systemically important.
House Financial Services Committee Chairman Patrick McHenry and Ranking Member Maxine Waters are expected to introduce legislation soon to regulate stablecoins.
“I think the idea of Facebook’s Libra several years ago was a big wake-up call for regulators around the world that some kind of virtual currency or stablecoin on a large technology network could quickly become something very big. We have to be ready,” Chopra said.
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