Facebook’s Novi launched its retail payment app yesterday (October 19) going with Paxos’ USDP stablecoin as its transactional currency while it awaits regulatory approval for its own Diem stablecoin. However, almost immediately, US Senate Democrats addressed a letter to Facebook CEO Mark Zuckerberg questioning the company’s credibility with crypto, and calling for the immediate discontinuance of the Novi pilot and a commitment not to bring Diem to market. Diem replied by clarifying that Diem is an independent organization with Facebook’s Novi being just one of more than two dozen members of the Diem Association, so that Novi’s pilot with Paxos is unrelated to Diem. The response went on to say that “When Diem comes to market [it] will do so having reflected the feedback of regulators from around the world and with confidence that Diem’s payment system is secure, will protect consumers, and will combat financial crime.” [Read more]
A Bank for International Settlements (BIS) paper addresses policy implications of incumbent financial institutions adopting platform-based business models. Digital platforms can dramatically lower costs and thereby aid financial inclusion, but these same features can give rise to digital monopolies. Platforms operate in multi-sided markets, and rely crucially on big data. This leads to specific network effects, returns to scale and scope, and trade-offs between efficiency and competition, financial stability and market integrity, and data privacy and consumer protection. To reap the benefits of platforms for financial inclusion while mitigating risks, policy makers can choose to: (i) apply existing financial, antitrust and privacy regulations, (ii) adapt old and adopt new regulations, combining an activity and entity-based approach, and/or (iii) provide new public infrastructures such as digital identity and retail fast payment systems. The paper argues that ex-ante competition rules, data portability and public infrastructures are particularly promising. [Read more]
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