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From Philanthropy to Interest: Why PayPal and Its Competitors Entered Libra

| News | Banking and Finance

Guillermo Yuste analyses the association of some companies with the Facebook 'stable coin', libra, to improve financial inclusiveness

"Are you crazy? The return on investment? We are talking about Christopher Columbus discovering America. What was the ROI of that?". That's how clearly Andy Grove, then CEO of Intel, responded when asked by an analyst in 1997 about the profitability of his new multi-billion-dollar plan to invest in Internet development. More than two decades later, the great technologies continue to camouflage the details of their interests behind the socio-cultural magnitude of their innovations.

PayPal convened several media outlets around the world at its headquarters in San Jose (USA) this September to discuss their company's culture and future goals. The executives wanted to make their strong commitment to financial and social inclusion clear, as well as to the environment and the future of the planet. Therefore, they said they had joined Libra, a project they see as the apex of financial equality at the global level.

There were many topics covered in the presentations (Xoom, PayPal Working Capital, Venmo ...) and in all of them PayPal managers stressed the social purpose of their work but denied being concerned about fierce competition from the payment sector. From the technological point of view, they argued in favour of the power of the PayPal brand and their efforts to act as a guarantee of the security of payments, but above all they stressed that there is a piece of cake for everyone.

Guillermo Yuste, Partner at Andersen Tax & Legal, states that "it is also not so rare for established banks to join what could be their 'natural enemy', with many of them acquiring 'fintechs' that tend to offer a very specific service to join their range of services, which are much more universal and broad".

In addition, he said that the pound proposal was very complex from a regulatory point of view. "In the end a 'stable coin' is a currency, but according to the law, a currency has to be issued by a central bank," he explains. "This opens up very relevant issues on a wide variety of fronts: tax (paying taxes), employment (receiving wages), etc.".

In short, Guillermo Yuste concludes, "from the regulatory point of view it generates problems because when it comes to working, this alien system would clash with entities that do issue electronic money in a regulated manner". And he defends that, if Libra fails in the end, there will be other players who will venture in the same direction, given the general trend towards new technologies and banking systems that is taking place in the financial system.

You can read the full report in El Confidencial.

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