The importance of financial transparency

eToro

The the latest developments of the World Financial Crisis, including the debt of greece and ongoing development in the involvement of Goldman Sachs in the CDO break, has raised the issue of additional regulation, our view is that the only regulation needed is transparency.

The importance of transparency is due to the nature of financial transaction, all financial transactions create a butterfly effect on the entire value chain (and entire economy), they are all inter related and therefore create an accountability chain .The problem is that lack of transparency of each transaction creates lack of consistency in the accountability chain, a known example of such
is blood diamonds, when an ‘innocent” women wears a blood diamond she is actually a part of the accountability chain, and if all transactions were transparent i doubt any women would wear them.

An example of such transparent value chain would look something like that :
Girl got diamond from Guy
Guy bought diamond from store owner
store owner got them from wholesale manufacture
wholesale bought them from diamond exchange
exchange got them from raw material supplier
material supplier bought them from bad guys

A transparent money system would automatically increase the levels of accountability significantly, and since most honest people don’t have a problem with most of their financial transaction they would be able to use it very easily.

What is the main barrier for such a system, privacy off course, should that be a problem, probably not with the right privacy rules. The transparency should be compulsory only on external transaction (exchange rate transparency) and not on each financial transaction in the money system. this means each owner of Good Dollars can select the privacy settings of his transaction, but “bad money” can’t enter the system because of the transparent connection between each dollar and it’s owner and the “tracks” the money leaves.

About Yoni Assia

Founder and CEO of Etoro.com