The entry of large technology firms (“big techs”) into financial services holds the promise of efficiency gains and can enhance financial inclusion. Regulators need to ensure a level playing field between big techs and banks, taking into account big techs’ wide customer base, access to information and broad-ranging business models. Big techs’ entry presents new and complex trade-offs between financial stability, competition and data protection.
Big tech has moved into financial services extensively in China. These companies have also been expanding rapidly in other emerging market economies (EMEs), notably in East Africa, Latin America, and Southeast Asia, East Africa. In the UK and the U.S., fintech has more of a share in providing credit than big tech.
One of the most important areas that could be impacted by Libra is remittances, i.e. money transfers by migrants to their families back home, which have proven to be a crucial driver of economic development. According to the World Bank, remittances to low- and middle-income countries reached a record high of $529 billion in 2018, with total remittances climbing to $689 billion. The problem being that sending money to people without access to a financial system, especially in regions most reliant on remittances such as Sub-Saharan Africa, is difficult and costly.
To be a validator node and founding member, organizations will need to meet technical requirements and specific evaluation criteria. If the conditions are met, upon approval, the Enterprise will have to make an initial minimum investment of $10 million worth of Libra Investment Tokens issued by the Association. Nonprofits will not be required to make the initial investment. However, they will have to cover the costs to run its node. It is estimated that the price for running the validator node will run approximately $280,000.
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The Kiffmeister is a former Senior Financial Sector Expert at the International Monetary Fund.
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