Big Tech Banking
Politicians have long accused big tech of monopolistic business practices, invasions of privacy, abuse of data and suppression of free speech. Voters largely agree, at least in the United States, where a majority support breaking up Amazon and other giant internet companies.
In recent years, governments have levied fines, raised taxes, crafted new regulations, held numerous hearings and issued a variety of threats to keep huge internet companies from becoming too powerful.
Imagine what they’ll do when big tech gets into the money business.
Amazon printing money?
In February 2021, Amazon published several job posts for engineers with experience in digital payments and distributed software systems. It wanted them to work on a new payment product that, in Amazon’s words, will enable customers to convert their cash into digital currency.
Those posts offered scant details on the product, leading to rampant speculation about the scope and nature of Amazon’s plans.
Does Amazon plan to create a cryptocurrency, a la bitcoin?
Adding fuel to the speculative fire, the company in recent years has hired former officials from the U.K.’s Financial Conduct Authority, a seemingly unnecessary move for a company that does not provide financial services.
Unless that’s the plan.
Bigger than bitcoin
With the prospect of central bank digital currencies, bitcoin-based merchant platforms and mass adoption of mobile payment technology all but guaranteed within the next decade, Amazon may want to get ahead of the curve.
It can profit from this shift by creating a natively digital, universally transferable currency that circulates freely.
More importantly, it will have control over its token and its use—with a ton of user data at its fingertips to optimize the experience of using money.
Alternatively, Amazon may want to link with bitcoin or another public blockchain as a free or low-cost payment rail, rather than create its own cryptocurrency.
While daily users of cryptocurrency often suffer high transaction fees, batching technology and so-called “second layer” platforms virtually eliminate those fees for the savviest users. If Amazon can make those complicated systems simple enough for the average person to use, it can cut payment processing fees substantially and streamline its payout infrastructure.
In that case, it can simply piggyback on a cryptocurrency that already exists.
Governmental scrutiny
Governments will certainly take a strong interest in whatever Amazon’s doing.
Given its sheer size and touchpoints, Amazon’s corporate cryptocurrency could quickly match the purchasing power and market capitalization of small national currencies, perhaps even threaten the integrity of the euro, dollar and renminbi.
When Facebook tried to create a cryptocurrency, the world’s governments threatened to shut them down. In response, it scaled back its ambitions, renamed its project “Diem” and got rid of most features of cryptocurrency.
Perhaps Facebook serves as a cautionary tale for big tech getting into the money business.
Providing a service is OK. Using that service to crush competitors and extract profits from users is not as OK, but it’s tolerable until somebody comes up with a better solution.
Issuing a global, private currency that could potentially undermine the international financial order and usurp monetary control from sovereign governments doesn’t seem OK at all.
Whatever Amazon’s intent, it has legal, regulatory and operational challenges to sort out before anybody can start talking about “Amazon crypto.”
Until then, let the speculation continue.
Mark Helfman, crypto analyst at Hacker Noon, edits and publishes the Crypto Is Easy newsletter at cryptoiseasy.substack.com. His second book, Bitcoin or Bust: Wall Street’s Entry Into Cryptocurrency, reached No. 2 on Amazon. @mkhelfman
