30 July 2014

Google scrapped plans for virtual currency over regulatory concerns

01 March 2012  |  10962 views  |  2 cash

Google chairman Eirc Schmidt says the Internet search giant once considered creating its own peer-to-peer money system, dubbed Google Bucks, but binned the idea because of regulatory concerns.

In a speech at the Mobile World Congress, Schmidt said the company had developed various proposals for creating a virtual currency that could be used for P2P transactions across its platforms.

However, the plans were put on ice because of fears that the company would fall foul of international money laundering and currency compliance issues.

"Governments are typically wary of the potential for money laundering with such proposals," Schmidt said. "We decided we didn't want to get into that because of these issues."

Regulatory barriers have stunted the growth of other digital currency pioneers such as Bitcoin, which has seen banks and card schemes pull support for third party exchange operators amid concerns over the legality and risks associated with dealing with unlicensed money tranmitters.

Even Facebook, which pulled in revenues of $557 million from its nascent payments business in 2011, is treading cautiously.

Echoing Schmidt's concerns, Facebook's IPO filing suggests that regulatory demands may slow its progress in the payments arena:

"Depending on how our payments product evolves, we may be subject to a variety of laws and regulations in the United States, Europe, and elsewhere, including those governing money transmission, gift cards and other prepaid access instruments, electronic funds transfers, anti-money laundering, counter-terrorist financing, gambling, banking and lending, and import and export restrictions."

The filling confirms that Facebook has already applied for money transmitter licenses in the US. This will mitigate regulatory uncertainty and "increase flexibility in how our use of payments may evolve" states the firm.

Comments: (2)

A Finextra member | 01 March, 2012, 14:04

The same problem has existed since the time of Beenz. many others have found the same problem - some research would have revealed this would become a show stopper.... I guess there is more mileage in not researching, announcing - then retracting.

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 02 March, 2012, 15:47

While I've always maintained that there's a huge need for banks to reduce the friction involved in their current crop of ePayment products, I've never felt that they could be disintermediated in this space by the likes of Google, Facebook or PayPal. Looks like the first purported challenger has withdrawn and the second one is urging caution. The regulatory ax has already come down on the third in India and I hope it's just a matter of time before it will be cut down to size in its primary markets like USA. I'd recently commented on Finextra that there's a difference between payments and shipping a parcel or booking a plane ticket. This announcement ought to make people realize that, while Internet Search is hard, payments isn't easy either. 

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