According to a report published by Bank of International Settlements (BIS) on 23 June, Facebook’s entrance in the cryptocurrency market poses risks for the banking sector.
BIS, an international financial institution based in Switzerland, comprising of sixty major world banks, maintained in the report that entry of tech giants like Facebook, Amazon, Alibaba, and Google in the crypto world could create new risks for the banks.
‘Many Potential Benefits’
The report also maintained that the entry of large technology firms in the crypto sphere could lead to enhanced financial inclusion, given their size and customer reach. According to the report, the low-cost structure business of large financial institutions could easily be scaled-up for providing basic financial services, even in the places which remain ‘unbanked.’ Having a pre-established platform, these firms can make use of their big data and analysis to minimize risks:
“As such, big techs stand to enhance the efficiency of financial services provision, promote financial inclusion and allow associated gains in economic activity.”
The report, however, warns that the very features that hold potential benefits could also lead to the generation of ‘new risks and costs associated with market power.’
The report says that consumer protection and financial stability would be at risk since ‘big-techs’ would ‘have the potential to loom large very quickly as systemically relevant financial institutions.’ This would further disrupt the traditional banking sector and the present financial structure.
Having the advantage of their ‘data-network-activities loop,’ these firms could establish themselves successfully in the concerned field, hence creating new challenges for the regulators– those of competition and data privacy.
BIS called for global cooperation among authorities to ensure some sort of ‘level playing field between big techs and banks.’ Meanwhile, the crypto world is abuzz with speculations about Facebook’s entry in the blockchain field.