The Bank for International Settlements (BIS) on June 23 warned in a report that financial services offered by large tech companies such as Google, Amazon and Facebook, could cause new problems for the banking sector.
BIS is a financial institution headquartered in Switzerland that comprises 60 Central Banks around the world.
The latest report was made due to Facebook’s intentions to launch its own digital currency, Libra.
Facebook released its whitepaper on Libra Coin where it detailed the operations of the new cryptocurrency.
New And Known Risks
In response to this, BIS issued a statement stating that while the incursion of tech companies into finance could help improve the financial sector, it stated that it also pose a risks which may be unknown before now.
The Bank for International Settlements revealed that the broad user base of large technology companies, the low cost of operation and their access they have to customer data, has the potential to rapidly change the financial services industry.
BIS warned that the “same characteristics that bring benefits also have the potential to generate new risks and costs associated with the power of the market”.
It also highlighted that the possibility of reaching many persons that have no access to banking services is one of the advantages of the involvement of tech giants with cryptocurrencies.
The problems include risk to financial stability and consumer protection which is posed by tech giants that have the potential to quickly gain systematic importance as relevant financial institutions.
Level Playing Field
BIS wants regulatory authorities to provide a playing field for Tech Companies and Banks
The report indicates that tech companies could also take advantage of a “loop of data network activities” that could accelerate their entry into the world of finance.
Therefore, the institution requests that national and international coordination be created between the authorities to “guarantee a level playing field between large companies and banks”.
The report is clearly an attempt to warn regulatory authorities about the threat of tech companies taking over the banking system. It remains to be seen if the steps proposed by BIS will influence the policy direction of relevant regulatory authorities.