Earlier this year,the authorities had directed Alibaba and Tencent to set up new holding companies for their financial services that could be supervised and regulated like more conventional financial institutions.
Beijing’s concern about the growth and power of the big fintechs and the billionaire entrepreneurs behind them is multi-faceted but has some common themes with the broader crackdown on tech companies.
The authorities are concerned about dominance and market power and the way the companies like Ant,or ride-sharing giant Didi and other big tech companies with near-monopoly positions,have leveraged their user data while resisting the efforts of a state obsessed with knowing what its citizens are doing to get access to that data.
They are also,concerned,moreover,about the growth of these privately owned payments networks and credit providers for their ability to control China’s financial system. Ant and WeChat Pay have effectively built digital payments systems using what could be regarded as their own digital currencies.
Their growth could explain why China has been fast-trackingthe development of a digital yuan even as it has clamped down on the big fintechs. At next year’s Winter Olympics in Beijing,the organisers are hoping to embed payments functions in gloves and clothing.
While it is unlikely that other governments and their regulators could or would adopt such a draconian approach to the perceived threats posed to their systems by the growth of fintechs and digital currencies,those threats are increasingly front-of-mind for authorities elsewhere as fintechs nibble away at their payments systems and cryptocurrencies and decentralised finance platforms gain increasing acceptance.
Whether it’s the efforts by the banks here to convince their regulators and the government to force companies like Apple to open up access to their digital wallets and apps or the continuing research by central banks into their own cryptocurrencies,there’s now a sense of urgency within Western economies to respond to the growth of the fintech sector.
The authorities are concerned about dominance and market power and the way the companies like Ant,or ride-sharing giant Didi and other big tech companies with near-monopoly positions,have leveraged their user data while resisting the efforts of a state obsessed with knowing what its citizens are doing to get access to that data.
In a speech last week,the head of the Bank for International Settlements’ innovation hub,Benoît Cœuré,essentially echoed the concerns of the Chinese authorities when he said the growing footprint of big techs in finances raises market power and privacy issues and challenges current regulatory approaches. The time had passed,he said,for central banks to “get going.”
The BIS has been advocating an acceleration of efforts by the world’s central banks to develop their own digital currencies to,among other benefits,maintain democratic control of currencies. It would take years,however,for central bank-issued digital currencies to be rolled out while “stablecoins and cryptoassets are already here.” This made it even more urgent that central banks should start working on the “nitty-gritty” of their design.
Loading
The Reserve Bank,with three other central banks,is working with the BIS to develop shared platforms for cross-border transactions using multiple digital currencies as part of that ambition of developing the “nitty-gritty” elements of the infrastructure required to enable central bank digital currencies to be deployed internationally.
China is responding to the perceived threat to control of its own financial system posed by Alibaba,Tencent and other fintechs. Elsewhere,it is Facebook,Apple,Google,Amazon and bitcoin and other fintechs and crypto assets that are invoking similar concerns,if not yet decisive responses.
The Business Briefing newsletter delivers major stories,exclusive coverage and expert opinion.Sign up to get it every weekday morning.