It’s been a week since Facebook’s entry into the cryptocurrency and payments world was announced. Since then, a lot has happened. From the Libra lead, David Marcus, talking about shared internal governance control over the cryptocurrency, to the regulatory uncertainty the crypto may face with politicians around the world taking a shot at the it, Facebook and Libra have been in the news a lot. Now, the central bank of central banks has rung its alarm bells.
The Bank of International Settlements [BIS] in its June 23 report on large technology companies operating in the financial space stated that big banks could soon face significant risks from companies such as, Amazon, Facebook, Google, Tencent, and Alibaba.
Finance, or rather a means of integrating a form of payments, seems to be the next frontier for technology firms, which the report stated could introduce, “new elements in the risk-benefit balance.” The report likened the “financial system” of an economy to “essential public infrastructure” and hence, in the view of “public interest,” the participation of large technology companies “goes beyond the immediate circle of their users and stakeholders.”
Big technology firms, due to their ability to amass a large network of customers owing to the “associated network effect,” and the pace at which they establish dominance within the FinTech world, are all crucial players in the space.
The report read,
“On the other hand, a big tech could be small in financial services and yet rapidly establish a dominant position by leveraging its vast network of users and associated network effects. In this way, the rule of thumb that encouraging new entry is conducive to greater competition can be turned on its head.”
The report further attested to the need for sound public policy on the above,