Big Tech's chaotic encroachment into finance
Hello and welcome to the latest edition of The Counterbalance. This week we’re taking a look at the crypto industry’s quest for legitimacy.
Sitting at the intersection between technology and finance, cryptocurrencies known as “stablecoins” are threatening to explode into a multi-trillion dollar problem for anyone concerned about the dangers of abuse of corporate power.
These digital tokens — which are often used to store value or for remittances — are designed to track the price of real currencies, and the world’s most powerful tech companies are taking notice.
One such example is Amazon, which is already considering issuing its own stablecoin. This would take payments activity away from banks, and allow Amazon to shift high volumes of transactions away from traditional cash and card payments, saving the tech giant billions of dollars in fees in the process.
Despite what the name implies, stablecoins are anything but stable. These digital tokens, — often issued by poorly regulated companies with a history of non-compliance — have frequently buckled under market volatility and lost their pegs to the dollar, causing the value of customer holdings to plummet.
Yet in the face of the sector’s shoddy track record, the US Senate last month passed legislation that created a pathway for private tech companies to issue stablecoins to consumers.
The legislation opens the door to a broad range of new stablecoin issuers, including banks, fintech companies, and others seeking to launch these risky assets into existing payment systems.
In Europe — which has already written legislation specifically for the crypto sector — the European Commission is set to treat stablecoins issued outside the bloc as interchangeable with its own tokens, despite warnings from the European Central Bank that this move could pose financial stability risks to European banks in times of crisis.
“Payments and transactions are such a basic element of our society, and we are letting these companies gain control of this,” said Carolina Melches, an economist specialising in digitalisation in the financial sector at Finanzwende Recherche. “Even despite their behaviour so far, when it comes to data protection and manipulating customers for their own interests.”
So, how did we get here? How did such a risky technology gain such a foothold in the mainstream financial system? The answer is depressingly familiar: the relentless encroachment of Big Tech into financial markets.
“Big Tech firms have a really big competitive advantage in terms of data and resources. They also face less regulatory costs, and can look for ways to participate in the finance sector without carrying the burdens of traditional financial institutions,” Melches added.
Today, the stablecoin market remains relatively niche, but the concern is that — if left unchecked — the volatile sector could intertwine with traditional markets to such a degree that any future market volatility will do exponential harm to consumers.
According to Treasury Secretary Scott Bessent, the market could grow to over $2 trillion in just the next few years, which would dwarf the approximately $250 billion stablecoins currently in circulation.
While this sounds like a lofty prediction, it comes at a time where the crypto sector has enjoyed unparalleled political support by Donald Trump, whose first financial disclosure as president earlier this summer revealed he earned almost $60 million in 2024 from a crypto platform called World Liberty Financial.
For anti-monopoly advocates, the stakes couldn’t be higher. If stablecoins become embedded in the global financial system without serious guardrails, we risk handing even more power to the same handful of companies that already dominate our online lives.
“We need to get our head around whether we want these tech companies to be financial players in the first place,” Melches added. “It will be quite difficult to remove them entirely, but we should try to keep commerce and banking separate. At least, we need to think about restructuring these companies internally so we ring fence financial units.”
Those invested in the fight against monopoly power must demand that lawmakers ensure Big Tech’s entry into traditional finance is not through a backdoor of niche technologies like stablecoins. “Innovation” is not a blank check for reckless experimentation, and transparency must come before profit chasing.
Highlight of the week: The Real Winners of the AI Race
The Centre for Research on Multinational Corporations (SOMO) released a report this week titled “The Real Winners of the AI Race”.
The report, authored by Margarida Silva, reveals the degree to which starts up are dependent on Big Tech firms — several of which rely on Nvidia, Amazon, Microsoft, and Google for AI infrastructure and specialised chips.
The report also calls on competition regulators — as well as other public authorities — to step up their collective scrutiny on AI as the technology becomes increasingly adopted by businesses and public services.
“There is a grave risk that Big Tech will end up dominating the development of a technology that is set to be integrated into private and public services globally,” Silva writes. “Past platform sifts have taught us that authorities must not wait until a market has fully consolidated to intervene.”
Weekly news roundup:
The UK Government today announced a new partnership with Google Cloud that it claims will “modernise outdated government IT, upskill 100,000 civil servants in digital and AI by 2030, and secure better tech deals for the taxpayer.” The lofty promises of the deal sit conspicuously in contrast with what the government believes behind closed doors, which is that most of the work done by junior civil servants can be automatable.
Earlier this week, muckrakers at POLITICO obtained a draft of the European Commission’s plan for a competitiveness fund. According to the draft, the Commission wants Europe to offer funding to “support businesses and projects along the entire investment journey.” The draft also provides what the Commission defines as competitiveness: “the EU’s capacity to raise productivity growth, high living standards, and strategic autonomy in a rapidly evolving landscape.”
Data mining: Another look at private equity and sports
Long time subscribers will recall a previous edition of The Counterbalance which explored the impact of the mass flow of private equity into professional sports.
The infusion of private equity capital into sports risks — as it does in every other industry it penetrates — industry commercialisation, hiked ticket prices for fans, and declining investment in grassroots projects.
“PE firms may prioritise short-term profits over the long-term sustainability of the teams or leagues they invest in,” said one PitchBook analyst note earlier this summer.
Last month one of the NBA’s most famed franchises — the LA Lakers —was sold for $10 billion, making it the second most-valuable team in North America, per the table below. But the table provides a timely reminder that unchecked private capital skews resources to the wealthiest regions at the expense of poorer communities.
The same is true in the world of sports. There are 124 teams in the US’s top four professional sports leagues (the NBA, the NHL, the NFL, and MLB). Roughly 80% of these teams are based outside of New York and California, but only two feature in a list of the most valuable teams in the country:
The Counterbalance is published every Thursday. Please send any thoughts and feedback to scott@balancedeconomy.org.