Peer-to-Peer Financing for Development: Regulating the Intermediaries
This paper critically examines the regulatory regimes that govern peer-to-peer intermediaries in the U.S.
The past decade has seen a merging of the previously distinct fields of foreign aid and private international finance. An example of this trend is the rise of peer-to-peer intermediaries. In response to these developments, regulation can either refine the regime for charities regulation in the funders’ home country, or integrate new aid intermediaries in the evolving regime for regulating international finance. The paper suggests doing both, for the following reasons:
- Peer-to-peer intermediaries subject funders to risks, and should therefore, be regulated as financial institutions;
- Peer-to-peer intermediaries rely on tax-deductible donations, and regulation must ensure that these donations are used effectively;
- Cross-border regulatory cooperation that governs international finance is essential for mobilizing and delivering development finance;
- Hybrid regulatory regimes are important for establishing accountability for the social outcomes of peer-to-peer development assistance.
The paper states that regulation of peer-to-peer intermediaries must become a part of regulations for cross-border financial transactions. This will not only protect the interests of private market participants, but also that of the public in the fund-providing and fund-receiving states.