The Financial Stability Institute (FSI) of BIS published a paper that provides a cross-country overview of policy responses to fintech developments, based on the survey responses from about 30 jurisdictions. The paper identifies several challenges facing authorities such as keeping up with the speed of technological change to understand novel business models and develop adequate policy responses, collecting data on fintech developments, adjusting regulatory reporting requirements, cooperating and coordinating at the local and international levels, and continuing to prevent regulatory arbitrage.
The paper also proposes a conceptual framework for analyzing policy responses to fintech, referred to as the "fintech tree." The fintech tree identifies three categories: fintech activities, enabling technologies, and policy enablers. Authorities pursue a range of approaches when regulating fintech activities. For digital banking, licensing regimes or other specific requirements are the exception. Some jurisdictions, however, have launched initiatives to facilitate the establishment of new banks, including digital banks. For enabling technologies, regulators have adjusted their existing regulations to add technology-specific elements in existing laws, regulation, or guidelines. However, there are no licensing regimes or other requirements that are specific to insurtech business models in surveyed jurisdictions. Nevertheless, the absence of insurtech-specific requirements does not mean that authorities are not responding to the increasing digitalization of the insurance business.
The survey reveals that almost all participating jurisdictions have either modified their existing regulatory frameworks or clarified their regulatory expectations on the use of cloud computing by financial institutions. Only a few jurisdictions have issued regulations specific to the distributed ledger technology while, to date, there are no specific regulatory requirements for financial institutions’ use of machine learning and artificial intelligence. However, a few jurisdictions have issued non-binding principles to encourage ethical and responsible use of artificial intelligence by financial institutions. Additionally, given its critical role in the economy, almost all jurisdictions have put in place cyber-security regulations and guidance specific for the financial sector.
Among the identified challenges, collecting data related to fintech developments and adjusting regulatory reporting requirements has been identified as a common challenge in most jurisdictions. Wherever licensed, authorities are obtaining information from regulated entities, including new entrants offering fintech services, through regulatory reporting. Other sources include information obtained through innovation facilitators or through the research of other public and private organisations. However, a survey conducted in 2019 by the Irving Fisher Committee found that fintech developments present various challenges to statisticians in a number of central banks. Some of these challenges are related to the granularity of data required to identify fintech firms and the integration of fintech activities in business classifications.
Keywords: International, Banking, Insurance, Fintech, Regtech, Blockchain, Artificial Intelligence, Cyber Risk, Cloud Computing, Big Data, Insurtech, Reporting, BIS, FSI
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