Bitcoin’s ‘Demise’? Google, Bailed-Out Citi Unveil Checking Accounts
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Another FAANG company has its sights on financial services — this time it’s Google, as Forbes reported on Nov. 16, polemically claiming this could “kill Bitcoin.”
In an interview with the Wall Street Journal last week, Google had revealed plans — devised under a project code-named Cache — to launch consumer checking accounts in partnership with Citigroup.
For cryptocurrency veterans, the inauspicious history of Google’s choice of banking partner will not go unremarked: on the eve of the 2008 global financial crisis, Citigroup CEO Chuck Prince was still telling journalists that “as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
The ailing, sprawling titan Citigroup would be revealed as an institution with one of the most toxic balance sheets in the industry: “by the summer of 2007, Citigroup alone was guaranteed $92.7 billion in ABCP [asset-backed commercial paper], enough to wipe out its entire Tier 1 capital,” as the historian Adam Tooze has noted in his history of the crisis.
Bailing out Citi — and salvaging the wider, ailing and systemically dangerous banking sector — would later force the Federal Reserve to undertake colossal liquidity actions as a “global lender of last resort” and to introduce regulation firmly entrenching the interdependence of the financial sector and government.
At the time, as Tooze writes, Sheila Bair of the FDIC pointedly remarked that certain of the Fed’s subsequent, more intrusive actions seemed little more than “a smokescreen put up to hide a bailout of Citigroup” — whose collapse could not be countenanced in the aftermath of Lehman.
As the WSJ noted in its coverage, tech firms such as Google view financial services as a conduit to getting “closer to their users” and acquiring highly valuable data on their transactions and economic behavior.
A McKinsey & Co. survey of consumers cited by the WSJ revealed that 58% of respondents said they would trust Google’s financial products — as compared with 35% for Facebook, 56% for Apple and 65% for Amazon.
Google has claimed it doesn’t use its existing Google Pay data — a service that counted 11 million U.S. users in 2018, according to Forbes — for advertising purposes and that it doesn’t share that data with third parties.
According to WSJ’s report, Google’s project with Citigroup will aim to foreground financial institutions’ brands instead of Google’s — and leave the compliance and financial “plumbing” to the banks.
Google executive Caesar Sengupta told the WSJ — in an apparent attempt to distinguish the project from initiatives like Facebook’s Libra — that:
“Our approach is going to be to partner deeply with banks and the financial system. It may be the slightly longer path, but it’s more sustainable.”
Forbes’ polemical argument that Google’s foray into digital finance will “kill Bitcoin” has therefore been scorned by figures in the cryptocurrency sector, all too aware of the issues associated with institutional intermediation, data-privacy and digital security. As Bitcoin educator Stephen Cole has quipped:
“A Google checking account threatens Bitcoin about as much as a new post office threatens email.”
The Citigroup partnership isn’t the first Google story to prompt the bell-ringers of Bitcoin’s purportedly imminent death in recent weeks: Google is reported to have recently achieved quantum supremacy, sparking some speculation as to how future-proof and resistant the cryptography of the Bitcoin blockchain will prove to be.
Yet, as Ethereum co-founder Vitalik Buterin has commented of the perceived threat:
“My one-sentence impression of recent quantum supremacy stuff so far is that it is to real quantum computing what hydrogen bombs are to nuclear fusion. Proof that a phenomenon and the capability to extract power from it exist, but still far from directed use toward useful things.”
Buterin’s argument is shared by Andreas Antonopoulos, who has characterized the danger of quantum for Bitcoin as “zip, bupkis nada.”