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A Bank for International Settlements (BIS) paper examines how CBDCs can contribute to an open, safe and competitive monetary system that supports innovation and serves the public interest. Like the latest generation of instant retail payment systems, retail CBDCs could ensure open payment platforms and a competitive level playing field that is conducive to innovation. The ultimate benefits of adopting a new payment technology will depend on the competitive structure of the underlying payment system and data governance arrangements. The same technology that can encourage a virtuous circle of greater access, lower costs and better services might equally induce a vicious circle of data silos, market power and anti-competitive practices. CBDCs and open platforms are the most conducive to a virtuous circle. CBDCs built on digital identification could improve cross-border payments, and limit the risks of currency substitution. Multi-CBDC arrangements could surmount the hurdles of sharing digital IDs across borders, but will require international cooperation.

This Bank of Canada staff discussion paper discusses the competition and innovation arguments for issuing a central bank digital currency (CBDC). A CBDC could be an effective competition policy tool for payments. On innovation, it argues that a CBDC could be necessary to support the vibrancy of the digital economy by helping solve market failures and fostering competition and innovation in new digital payments markets. Overall, the paper finds that competition and innovation are valid supporting arguments for issuing a CBDC.

This Bank of Canada staff discussion paper discusses the competition and innovation arguments for issuing a central bank digital currency (CBDC). A CBDC could be an effective competition policy tool for payments. A CBDC could also support the vibrancy of the digital economy. It could help solve market failures and foster competition and innovation in new digital payments markets.

The Banco Central do Brasil president reportedly said that Facebook Inc messaging service WhatsApp would be allowed to launch its new payments service in the country, but called for proof it can operate safely in terms of data protection in a competitive market. "We are not saying that it is not competitive, we just want them to ask for authorization and to show us how it will work for us to make sure it is competitive."

"This World Bank note examines the implications of digital innovation for market structure and attendant policies, including financial and competition regulation. There have been several surveys of regulatory responses. This note takes a step back, to look at what the economic theory of banking and financial intermediation can tell us about how technology may drive industrial organization in the sector, and how that might inform further policy responses. The paper roots the impact of the digital transformation of finance in innovations that have enabled providers to address long-standing challenges of financial intermediation, including asymmetric information, uncertainty, incomplete markets, and fixed and variable costs of production. The paper describes how digital innovation affects these key economic frictions in finance and alters the financial services value chain and industrial organization. The forces driving these changes, and potential outcomes in terms of industry structure, lead to insights for policy makers on how to harness the benefits of fintech, while mitigating some of the risks, particularly around competition and market structure. The focus is on economic and technological forces that apply broadly across financial services. It recognizes that the sector encompasses a wide range of different products and services and is composed of numerous sub-markets that might use different technologies or have different economic structures. These may thus diverge in market structure and competition outcomes."

According to the OECD, competition will increase as new players enter the industry, but the long-term impact is more open, and regulation shall decisively influence to what extent BigTech shall enter the industry and who shall be the dominant players. Pursuant to OECD's view, the challenge for regulators will be to keep a level playing field that strikes the right balance between fostering innovation and preserving financial stability where the consumer protection concerns rise to the forefront.

The U.S. Department of Commerce published a report on the Responsible Advancement of U.S. Competitiveness in Digital Assets. It introduced a four-pillar framework that "offers a path forward to promote U.S. competitiveness, responsible innovation, and leadership in digital assets." 

"This IMF paper revisits the competitive environment of the banking system in Latin America and the Caribbean and investigates the early impact of fintech development in the region thus far. Against the backdrop of high net interest margins (NIMs) and limited financial depth in the region, panel regressions broadly confirm the results of existing literature on the association of NIMs with the changes in financial sector structure, including market concentration, administrative costs, and foreign banks, although differences between domestic and foreign banks narrowed after the 2008-09 global financial crisis. Difference-in-difference regressions and case studies on Brazil and Mexico suggest that fintech is associated with reductions in NIMs and defensive responses by incumbent banks, both of which benefit consumers. The case studies also shed light on regulatory approaches and prudential considerations in fostering financial innovation and banking sector competition."

Central bank digital currencies (CBDCs) could solve the "competition issues" in the cryptocurrency sector, according to a study requested by the European Parliament Committee on Economic and Monetary Affairs.

In its latest paper "The Rise of Digital Money" that marks the launch of a new series Fintech notes, IMF analyses how technology companies are stepping up the competition to credit card companies and large banks.

"If the ultimate outcome of a private market for money is a monopoly, does it make much difference whether the monopoly is run by a private company versus a public entity? While the former case could lead to economic exploitation based on a market advantage, the threat of potential competition would inhibit this tendency. The latter case, however, invites a more sinister abuse of government power - even tyranny - as government precludes market entry to alternative issuers."

According to "Why Is XRP Underperforming?" report by cryptocurrency exchange OKEx, "as a payment solution provider, Ripple is facing intense competition," and "any negative impact on the company could easily transform into undesirable price actions in XRP."

This BIS working paper advocates regulating bigtechs using an entity-based rather than a "same activity, same regulation" activity-based regulatory approach. It argues that there is only limited scope for harmonizing the requirements for different players in specific market segments without jeopardising higher-priority policy goals. The regulatory framework should incorporate entity-based requirements for big techs in areas such as competition and operational resilience that would address the risks stemming from the different activities they perform. This strategy would not only help regulation to achieve its primary objectives, but would also serve to mitigate competitive distortions. However, in some policy domains, such as consumer protection or AML/CFT, an activity-based approach may well be adequate enough to achieve primary objectives.

In many emerging economies, digital financial services markets are limited to one or two major providers, reducing innovation, customer choice and potentially facilitating monopolistic or cartelistic behavior. In this primer, CGAP proposes regulatory levers that policy makers can use to promote more competition.

The U.S. Justice Department has sued to block Visa's $5.3 billion acquisition of bank data sharing startup Plaid, citing competition concerns. It claims that "Visa is a monopolist in online debit transactions, extracting billions of dollars in fees annually from merchants and consumers. Plaid, a financial technology firm with access to important financial data from over 11,000 U.S. banks, is a threat to this monopoly: it has been developing an innovative new solution that would be a substitute for Visa's online debit services. By acquiring Plaid, Visa would eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers.

Absent stricter banking regulation, the central bank is subject to the same competitive forces as everyone else in the market: it needs to compete. Public money on its own is not a sufficient differentiator, particularly in 'normal' times (i.e. no acute financial crisis) where most people wouldn't really know the difference, anyway. Instead, users first and foremost value convenience, speed, and ease of use - features which public sector services are not necessarily most renowned for. In the very competitive payments market, it is thus plausible that CBDC lacks a sufficiently compelling value proposition for warranting users to switch from well-established private solutions. The resulting low-impact scenario will have, as the name suggests, little implications for the structure of our monetary and financial systems.

The Group of Thirty (G30) published a report on digital currency. It includes a definitive description of the digital currency that will be issued by the People's Bank of China. The report then goes on to highlight the key issues that policymakers have to consider in responding to these developments. Among its recommendations are that national authorities must play an active leadership role in setting standards and providing public infrastructure for payments, which cannot be left to market forces alone. Also, because new technologies may require a sufficiently long phase-in period in order to be tested fully, multiple payment alternatives should be introduced so that the payments system gains a measure of resilience and includes adequate competition. Also, existing technologies that allow faster retail payments, which drastically increase competition and lower costs to businesses and consumers, should be implemented more widely.

According to a special chapter of the BIS Annual Economic Report, digital innovation is radically reshaping the provision of payment services, and central banks are embracing this innovation. They promote interoperability, support competition and innovation, and operate public infrastructures - all essential for easily accessible, low-cost and high-quality payment services. And central bank digital currencies (CBDCs) can foster competition among private sector intermediaries, set high standards for safety and risk management, and serve as a basis for sound innovation in payments.

"Big Techs' expansion into financial services can bring competition, efficiency, and inclusion, particularly in emerging market and developing economics. But it also gives rise to issues concerning a level playing field with banks, operational risk, too-big-to-fail issues, as well as challenges for antitrust rules and consumer protection. This column presents a policy triangle that highlights the trade-offs between three objectives: financial stability, competition, and data privacy. Handling these challenges requires more coordination on rules and standards, both between domestic authorities and across international borders. "

ECB Executive Board member Fabio Panetta pushed back on the CBDC redundancy argument, pointing to the central role of public money in the economy, as the monetary anchor and by its fungibility with private money. Also, a digital euro would boost competition by making a free and easy to use digital means of payment available to everyone. In addition, the option to use CBDC would allow all European intermediaries, big and small, to offer products with a higher technological content at a competitive cost, making them better able to compete with global operators.