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Regulating fintech: what is going on, and where are the challenges?

Author(s): Fernando Restoy

Date published: Feb 2020

SUERF Policy Note, Issue No 134
by Fernando Restoy, Bank for International Settlements

JEL-codes: G20, G21, G28, D4.
Keywords: Fintech tree, regulatory perimeter, level playing field, technology enablers, innovation facilitators, activity-based regulation.

The article reviews recent policy developments in the area of fintech. Leveraging on the FSI’s fintech tree concept, policy initiatives are classified into three groups: (i) those relating to the regulation of new fintech activities (eg digital banking, crowdfunding, e-money, robo-advice); (ii) requirements for the use of new technologies (eg cloud computing, artificial intelligence/machine learning); and (iii) policy enablers (eg digital identities, innovation hubs, sandboxes). It also discusses pending challenges, focusing on the need to strike the right balance between promoting orderly innovation and preserving market integrity, financial stability, consumer protection and a level playing field. Finally, it stresses that the principle of “same activity, same regulation” does not provide the full answer to regulatory challenges. The same activity performed by different entities (deposit-takers versus non-deposit-takers, regular fintechs versus big techs) generates different risks. Therefore, activity-based regulation should be considered as a complement to rather than as a substitute for entity-based regulation.
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SUERF Policy Note, Issue No 134SUERF Policy Note, Issue No 134

Regulating fintech: what is going on, and where are the challenges?Web version: Regulating fintech: what is going on, and where are the challenges?

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