## EXECUTIVE SUMMARY

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### Context and purpose
- Rapid advances in digital technology are transforming the economic and financial landscape, creating opportunities and challenges for consumers, financial and nonfinancial firms, service providers, and regulators.
- IMF and World Bank member countries have sought information, assistance, and advice about appropriate institutional frameworks to foster fintech’s possibilities and improve the efficiency, safety, and inclusion of financial systems.
- The Bali Fintech Agenda outlines high-level issues for consideration by individual country members as they develop policy responses to fintech; it focuses on implications for the financial sector and highlights opportunities and potential risks.
- The Agenda does not represent the work programs of the IMF or World Bank nor provide specific guidance or policy advice; it will inform staff focus, dialogue with national authorities, and contributions to SSBs and other international institutions.
- Reach: overarching elements have broad relevance to all member countries but should be tailored to national circumstances and to the specific financial services considered (e.g., credit, savings, insurance, payments).

### Opportunities and risks
- Opportunities:
  - Reduce costs and frictions, increase efficiency and competition, narrow information asymmetry, and broaden access to financial services—especially in low-income countries and for underserved populations.
  - Support broader economic development and inclusive growth, facilitate international payments and remittances, and simplify and strengthen regulatory compliance and supervisory processes.
- Risks and challenges:
  - Consumer and investor protection concerns; clarity and consistency of regulatory and legal frameworks; potential for regulatory arbitrage and contagion; adequacy of financial safety nets, including lender-of-last-resort functions of central banks; threats to financial integrity.
  - Adoption may pose transition challenges; policy vigilance required to make economies resilient and inclusive and to capture full benefits without leaving the underserved behind.
  - Cybersecurity, operational resilience, concentration of third-party providers, and data ownership/privacy risks.

### International considerations and cooperation
- International bodies engaged: FSB, BIS, BCBS, CPMI, IOSCO, IAIS, FATF (AML/CFT guidance for new payment methods).
- Calls for greater international coordination and a holistic framework examining fintech across finance, technology, and competition to reduce regulatory arbitrage and inconsistencies in cross-border application of laws and regulations.
- Ongoing cooperation includes exchange of information and discussion of good practices, but no singular holistic framework currently exists.

### Roles and next steps for IMF and World Bank
- Executive Boards of both institutions will endorse the Agenda as a framework for high-level consideration by member countries.
- IMF initial focus areas:
  - implications of fintech for cross-border capital flows;
  - national and global monetary and financial stability;
  - evolution of the International Monetary System and global financial safety net.
- World Bank initial focus areas:
  - enabling reforms and capacity building to adopt fintech solutions to deepen financial markets;
  - enhancing responsible access to financial services;
  - improving cross-border payments and remittance transfer systems.
- Staff will work closely with international bodies, including SSBs, to incorporate emerging standards and best practices into IMF and World Bank surveillance and capacity development work.

### Policy challenge
- Policymaking must strike the right balance between enabling financial innovation and addressing market and financial integrity, consumer protection, and financial stability risks.

### Question for Boards
- Do Directors endorse the Bali Fintech Agenda, summarized in Annex I, as a framework for consideration of high-level issues by individual country members, including in their own domestic policy discussions?

---

### ANNEX I — THE BALI FINTECH AGENDA (summary of 12 elements)

### High-level elements (I–XII)
- I. Embrace the Promise of Fintech — capture benefits for access, inclusion, deepening markets, and remittances; prepare via institutional capacity and cross-agency approaches.
- II. Enable New Technologies — facilitate foundational infrastructures (telecommunications, broadband, mobile data, data repositories, payment and settlement services) and ensure open, affordable access and conducive policy environment.
- III. Reinforce Competition — ensure open, free, and contestable markets; address market concentration; foster standardization, interoperability, and fair access to key infrastructures.
- IV. Foster Fintech for Financial Inclusion and Market Development — integrate fintech into national inclusion and digital literacy strategies; support public–private knowledge-sharing.
  - Key statistic: an estimated 1.7 billion adults globally do not have access to the formal financial economy.
- V. Monitor Developments Closely — deepen understanding of evolving financial systems; extend monitoring frameworks; maintain dialogue with industry to identify emerging opportunities and risks.
- VI. Adapt Regulatory Frameworks and Supervisory Practices — facilitate safe entry of new products and intermediaries; modify regulatory perimeter where needed; ensure proportionate, holistic national responses aligned with SSB guidance.
- VII. Safeguard Financial Integrity — identify and mitigate criminal misuse risks; strengthen AML/CFT compliance and monitoring; use Regtech and Suptech to support compliance and supervision.
- VIII. Modernize Legal Frameworks — provide legal clarity in contracts, data ownership, insolvency, resolution, and payments tailored to national circumstances.
- IX. Ensure Monetary and Financial Stability — consider fintech implications for central banking services, market structure, safety nets, and monetary policy transmission; explore central bank improvements including potential digital currency issuance.
- X. Develop Robust Financial and Data Infrastructure — build resilient infrastructure against disruptions and cyber-attacks; address data ownership, protection, privacy, cybersecurity, operational and concentration risks, and consumer protection.
- XI. Encourage International Cooperation and Information-Sharing — share knowledge, experience, and best practices across regulators and with the private sector to foster effective regulatory responses and build global consensus.
- XII. Enhance Collective Surveillance — adapt policies to support inclusive global growth, poverty alleviation, and international financial stability; address increased interconnectedness, spillovers, and capital flow volatility through IMF and World Bank capacity building and surveillance.

---

### SELECTED EXCERPTS — REGULATION, FINANCIAL INTEGRITY, LEGAL FRAMEWORKS, MONETARY POLICY, INFRASTRUCTURE, SURVEILLANCE

### Regulation and supervisory approach
- Paragraphs 35–38 outline principles:
  - 35. Regulation of new activities and innovative business models should be proportionate to their risks to avoid stifling innovation.
  - Use proportionate regulatory, governance, and disclosure requirements; facilitate safe market entry via temporarily restricted authorization schemes (such as sandboxes) and restricted licensing schemes.
  - Assess whether outsourcing frameworks and data-privacy regulations are technology-neutral or need revision (example: cloud computing).
  - 36. Technological advances may support the effectiveness and efficiency of regulation (machine learning, automated data collection, enhanced Legal Entity Identifiers, big data analysis, machine-readable regulations) while posing attendant issues:
    - (a) data quality, standardization, and volume bring operational challenges;
    - (b) over-reliance on quantifiable signals and risks may result in misguided decisions;
    - (c) homogeneity of approaches and models may increase procyclicality;
    - (d) potential misuse of fintech to circumvent regulatory requirements.
  - 37. Keeping up with market developments may be challenging for regulatory authorities; ensure staff knowledge, skills, and tools remain relevant.
  - 38. Countries should formulate a holistic policy response, building on SSB guidance; modifications should be technology-neutral, proportionate, adaptable, and internationally consistent.

### Safeguarding financial integrity (AML/CFT)
- VII. Safeguard Financial Integrity and paragraphs 39–44:
  - 39. ML/TF and related crimes can significantly undermine economic and financial stability; implement sound AML/CFT frameworks in line with the FATF 40 Recommendations.
  - 40. Crypto-assets typically present higher potential of misuse for ML/TF, fraud (including cyber fraud), tax evasion, and other illicit activities; decentralized, global reach and varying degrees of anonymity complicate regulation.
  - 41. National responses vary: monitor; adapt AML/CFT frameworks; ban specific activities (example: “initial coin offerings”).
  - 42. FATF focuses on “new payment products and services” and “virtual currencies” (crypto-assets) and recommends focusing AML/CFT efforts on intersection points between crypto-assets and traditional finance (e.g., exchanges).
  - 43. Regtech and Suptech could strengthen AML/CFT: identity verification (including biometrics); blockchain-based KYC repositories; data analytics for continuous risk-monitoring.
  - 44. Actions: identify and assess ML/TF risks; apply proportionate AML/CFT measures; encourage fintech that strengthens AML/CFT; develop institutional capacity and regular dialogue with fintech providers.

### Modernizing legal frameworks
- VIII. Modernize Legal Frameworks and paragraphs 45–48:
  - 45. Sound legal frameworks provide stability, clarity, and predictability; legal certainty can be undermined if frameworks do not keep pace with new technology-driven business models and decentralized protocols.
  - 46. Consider whether broad-based legal principles need refinement for electronic signatures, smart contracts, data ownership, insolvency, and bankruptcy.
  - 47. Modernization may require supplementing gaps and clarifying ambiguities (example: legal uncertainty about treatment of balances held under non-traditional account arrangements and settlement finality in blockchain settings).
  - 48. Harmonize approaches in payments law and in data usage, privacy, and security to enhance legal certainty while recognizing diversity of legal frameworks.

### Central banking, monetary transmission, and financial stability
- IX. Ensure the Stability of Domestic Monetary and Financial Systems and paragraphs 49–51:
  - 49. Fintech blurs boundaries among intermediaries and affects central bank capacity to implement monetary policy and supervisory agencies’ ability to safeguard financial stability.
  - 50. Fintech can affect multiple monetary transmission channels: balance-sheet channel, bank-lending channel, risk-taking behavior, role of banks in payments, and demand for central bank liquidity; policymakers may need to adapt operational frameworks.
  - 51. Opportunities and risks for central banks:
    - a. Some central banks consider issuing “central bank digital currency” (CBDC) to address decline in cash use, maintain demand for central bank money, reduce cash maintenance costs, and improve financial inclusion; CBDC design could affect commercial bank funding.
    - b. Central banks are exploring fintech to improve payments systems (example: DLT assessed for efficiency and resilience).
    - c. Fintech-enabled multiple payment systems could both improve resilience and amplify risks at times of stress; determination of systemically important entities may need expansion to include nonbank institutions and critical fintech infrastructure.
    - d. Lender-of-last-resort role and central bank support may need re-examination given decentralization and shifts outside traditional banking perimeters; possible legislative/regulatory adjustments.
    - e. Implications for financial safety net arrangements (e.g., deposit insurance scope and coverage, crisis management and resolution of systemic fintech firms).

### Financial and data infrastructure, operational resilience, and cybersecurity
- X. Develop Robust Financial and Data Infrastructure and paragraphs 52–58:
  - 52. Robust digital infrastructure is necessary for operational resilience and to preserve confidence.
  - 53. Fintech increases IT dependencies and operational risks; outsourcing to third-party providers can place operational risks on incumbents; many third parties may fall outside the regulatory perimeter.
  - 54. Economies of scale may increase concentration risks and interconnectedness, raising systemic risk concerns.
  - 55. Cybersecurity is paramount; integrate into design and adopt robust standards for cyber resilience across the financial services supply chain.
  - 56. Robust business continuity and recovery plans are essential: back-up systems, incident response plans, regularly tested with realistic failure scenarios.
  - 57. Increased digitalization heightens the need for strong frameworks to protect data: clarity of data ownership; safeguards for confidentiality, availability, and integrity; privacy and ethical use; accountability for breaches.
  - 58. Steps for authorities: embed cybersecurity and operational risk management into enterprise-wide frameworks; promote robust outsourcing arrangements; monitor and manage concentration risk; ensure robust data-governance frameworks; increase supervisory capacity and specialized skills.

### International cooperation, surveillance, and capacity building
- XI. Encourage International Cooperation and Information-Sharing and paragraphs 59–61:
  - 59. As technologies operate across borders, international cooperation is essential to ensure effective regulation and to avoid a “race to the bottom.”
  - 60. Sharing experience and best practices helps guide effective regulatory frameworks; institutions with universal membership (IMF, World Bank) can gather diverse country inputs.
  - 61. Countries can support international collaboration by sharing views and experiences, monitoring interconnectedness, adapting policy responses, monitoring global developments, and building technical and regulatory capacities via international training and peer-learning.
- XII. Enhance Collective Surveillance and paragraphs 62–68:
  - 62. Strengthen bilateral and multilateral policy advice by IMF and World Bank to support inclusive growth, financial inclusion, and stability amid rapid technological change.
  - 63. Fintech could change cross-border savings and transactions, affecting capital and current-account flows; need to identify, monitor, and assess changes in capital flows.
  - 64. Blurring boundaries for origin and destination of international flows requires closer examination; IMF’s Institutional View remains applicable.
  - 65. Fintech could lead to a more decentralized, interconnected global financial system with uncertain resilience; digital assets and central bank-issued assets could accelerate a multipolar global economy.
  - 66. Fintech implications for the global financial safety net (GFSN) merit review, including reserve assets and reserve pooling mechanisms.
  - 67. IMF and World Bank can help members via capacity building and FSAPs to assess development, resilience, legal/regulatory frameworks, financial inclusion, and crisis management capacity; FSAP recommendations inform capacity development and other activities.
  - 68. Actions to enhance surveillance and implementation of best practices include filling data and statistics gaps; supporting financial integrity and resilience; providing capacity development and policy advice across relevant areas; advising on public-sector balance sheet risks and macroprudential policy; strengthening CD on technological and financial innovations including cybersecurity; assessing fintech implications for capital flows and the IMS; maintaining a strong and effective GFSN; and proactively coordinating to address global risks and opportunities.

*EXECUTIVE SUMMARY, The Bali Fintech Agenda—Chapeau Paper; October 3, 2018.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Rapid advances in digital technology are transforming the economic and financial landscape, creating opportunities and challenges for consumers, financial and nonfinancial firms, service providers, and regulators.
- Experiences and advances in fintech vary across the IMF and World Bank membership; emerging and developing economy members may have needs and policy concerns that contrast with those in advanced economy members and may not always be represented in the standard-setting bodies (SSBs).
- Member countries have sought information, assistance, and advice about appropriate institutional frameworks to foster fintech’s possibilities and improve the efficiency, safety, and inclusion of financial systems.

### Opportunities and Risks
- Opportunities:
  - Fintech can reduce costs and frictions, increase efficiency and competition, narrow information asymmetry, and broaden access to financial services—especially in low-income countries and for underserved populations.
  - Innovations support broader economic development and inclusive growth, facilitate international payments and remittances, and simplify and strengthen regulatory compliance and supervisory processes.
- Risks:
  - Concerns include consumer and investor protection; clarity and consistency of regulatory and legal frameworks; potential for regulatory arbitrage and contagion; adequacy of financial safety nets, including lender-of-last-resort functions of central banks; and threats to financial integrity.
  - Adoption may pose transition challenges; policy vigilance is required to make economies resilient and inclusive and to capture full benefits without leaving the underserved behind.
- Challenge:
  - Policymaking must strike the right balance between enabling financial innovation and addressing market and financial integrity, consumer protection, and financial stability risks.

### International Considerations
- International bodies reviewing fintech implications include: Financial Stability Board (FSB), Bank for International Settlements (BIS), Basel Committee on Banking Supervision (BCBS), Committee on Payments and Market Infrastructure (CPMI), International Organization of Securities Commissions (IOSCO), International Association of Insurance Supervisors (IAIS), and FATF (on AML/CFT guidance for new payment methods).
- Calls for greater international coordination and a holistic framework that examines fintech issues across finance, technology, and competition to reduce regulatory arbitrage and inconsistencies in cross-border application of laws and regulations.
- Ongoing cooperation includes exchange of information and discussion of good practices, but no singular holistic framework currently exists.

### Roles of the Fund and Bank
- The IMF and World Bank staff prepared the Bali Fintech Agenda (summarized in Annex I) in response to member calls for international cooperation and guidance.
- The Agenda:
  - Outlines high-level issues for consideration by individual country members as they develop policy responses to fintech.
  - Is focused on implications for the financial sector and highlights opportunities and potential risks.
  - Does not represent the work programs of the IMF or World Bank nor provide specific guidance or policy advice.
  - Will inform IMF and World Bank staff focus, dialogue with national authorities, and contributions to SSBs and other international institutions.
- Reach:
  - The Agenda’s overarching elements have broad relevance to all member countries but should be tailored to national circumstances and to the specific financial services considered (e.g., credit, savings, insurance, payments).

### Next Steps and Initial Focuses
- The Agenda will be endorsed by the Executive Boards of both the IMF and the World Bank as a framework for high-level consideration by member countries.
- The IMF and World Bank will continue to monitor and analyze fintech developments and reflect the Agenda in their respective mandates.
- IMF initial focus areas:
  - Implications of fintech for cross-border capital flows;
  - National and global monetary and financial stability;
  - Evolution of the International Monetary System and global financial safety net.
- World Bank initial focus areas:
  - Enabling reforms and capacity building to adopt fintech solutions to deepen financial markets;
  - Enhancing responsible access to financial services;
  - Improving cross-border payments and remittance transfer systems;
  - Drawing on the International Finance Corporation’s experience and contributing to the digital economy foundations within the World Bank Group’s disruptive technologies engagement.
- Staff will work closely with international bodies, including SSBs, to incorporate emerging standards and best practices into IMF and World Bank surveillance and capacity development work.
- Implications for IMF and World Bank work programs will be developed and presented to their Executive Boards as membership needs become clearer.

### Issues for Board Consideration
- Do Directors endorse the Bali Fintech Agenda, summarized in Annex I, as a framework for consideration of high-level issues by individual country members, including in their own domestic policy discussions?

### Annex I — The Bali Fintech Agenda (summary of 12 elements)
- The Agenda condenses key considerations into 12 elements for policymakers and the international community; these elements apply to conventional and Islamic financial instruments and products and are intended as a framework to support awareness, further learning, and ongoing work. The 12 elements are:
  I. Embrace the Promise of Fintech — capture benefits for access, inclusion, deepening markets, and remittances; prepare via institutional capacity and cross-agency approaches.
  II. Enable New Technologies — facilitate foundational infrastructures (telecommunications, broadband, mobile data, data repositories, payment and settlement services) and ensure open, affordable access and conducive policy environment.
  III. Reinforce Competition — ensure open, free, and contestable markets; address market concentration; foster standardization, interoperability, and fair access to key infrastructures.
  IV. Foster Fintech for Financial Inclusion and Market Development — integrate fintech into national inclusion and digital literacy strategies; support public–private knowledge-sharing.
  V. Monitor Developments Closely — deepen understanding of evolving financial systems; extend monitoring frameworks; maintain dialogue with industry to identify emerging opportunities and risks.
  VI. Adapt Regulatory Frameworks and Supervisory Practices — facilitate safe entry of new products and intermediaries; modify regulatory perimeter where needed; ensure proportionate, holistic national responses aligned with SSB guidance.
  VII. Safeguard Financial Integrity — identify and mitigate criminal misuse risks; strengthen AML/CFT compliance and monitoring; use Regtech and Suptech to support compliance and supervision.
  VIII. Modernize Legal Frameworks — provide legal clarity in contracts, data ownership, insolvency, resolution, and payments tailored to national circumstances.
  IX. Ensure Monetary and Financial Stability — consider fintech implications for central banking services, market structure, safety nets, and monetary policy transmission; explore central bank improvements including potential digital currency issuance.
  X. Develop Robust Financial and Data Infrastructure — build resilient infrastructure against disruptions and cyber-attacks; address data ownership, protection, privacy, cybersecurity, operational and concentration risks, and consumer protection.
  XI. Encourage International Cooperation and Information-Sharing — share knowledge, experience, and best practices across regulators and with the private sector to foster effective regulatory responses and build global consensus.
  XII. Enhance Collective Surveillance — adapt policies to support inclusive global growth, poverty alleviation, and international financial stability; address increased interconnectedness, spillovers, and capital flow volatility through IMF and World Bank capacity building and surveillance.

*EXECUTIVE SUMMARY, The Bali Fintech Agenda—Chapeau Paper; October 3, 2018.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Overview
- Rapid advances in technology are transforming the economic and financial landscape, offering wide-ranging opportunities while raising potential risks.
- Fintech can support potential growth and poverty reduction by strengthening financial development, inclusion, and efficiency—but it may pose risks to financial stability and integrity, as well as to consumer and investor protection.
- National authorities are keen to foster the benefits and mitigate potential risks.
- Many international and regional bodies are examining the various aspects of fintech, in line with their respective mandates.
- There have been calls for greater international cooperation and guidance on how to address the emerging issues.

### The Bali Fintech Agenda: Purpose and Use
- In response to calls from member countries the IMF and World Bank have developed the “Bali Fintech Agenda.”
- It brings together key considerations for policymakers and the international community into 12 elements arising from the experience of member countries, including:
  - I.   Embrace the promise of fintech.
  - II.  Enable new technologies to enhance financial service provision.
  - III. Reinforce competition and commitment to open, free, and contestable markets.
  - IV.  Foster fintech to promote financial inclusion and develop financial markets.
  - V.   Monitor developments closely to deepen understanding of evolving financial systems.
  - VI.  Adapt regulatory framework and supervisory practices for orderly development and stability of the financial system.
  - VII. Safeguard the integrity of financial systems.
  - VIII. Modernize legal frameworks to provide an enabling legal landscape.
  - IX.  Ensure the stability of domestic monetary and financial systems.
  - X.   Develop robust financial and data infrastructure to sustain fintech benefits.
  - XI.  Encourage international cooperation and information-sharing.
  - XII. Enhance collective surveillance of the international monetary and financial system.
- The Agenda does not represent the work program of the IMF or the World Bank, nor does it aim to provide specific guidance or policy advice at this stage.
- It will help guide the focus of IMF and World Bank staff in their work on fintech issues within their expertise and mandate, inform their dialogue with national authorities, and help shape their contributions to the work of the standard-setting bodies (SSBs) and other relevant international institutions on fintech issues.

*THE BALI FINTECH AGENDA—BACKGROUND PAPER   WORLD BANK GROUP       INTERNATIONAL MONETARY FUND*

### INTRODUCTION

### INTRODUCTION

### Overview: fintech transformation and policy challenge
- Rapid advances in digital technology are transforming the economic and financial landscape, creating opportunities and challenges for consumers, financial and nonfinancial firms, service providers, and regulators.
- Developments are largely led by the private sector and driven by global digitization and technological progress reshaping economies, governments, and societies.
- Experiences and advances in fintech vary across IMF and World Bank membership, including emerging and developing economies, as well as small and fragile states.
- Policymaking must be nimble, innovative, and cooperative, and strike the right balance between enabling financial innovation and addressing challenges to:
  - financial stability,
  - market and financial integrity,
  - consumer protection.
- The balance is critical to deliver welfare benefits and avoid stalling fintech development with the risk of leaving the underserved behind.

### Demand for guidance and institutional response
- IMF and World Bank member countries have sought information, assistance, and advice on institutional frameworks to foster fintech while improving financial system efficiency, safety, and inclusion.
- The IMF and World Bank have been closely monitoring and analyzing fintech developments within their mandates.
- This paper was prepared by IMF and World Bank staff to highlight fintech opportunities and risks and has benefited from work by international bodies and national authorities.

### Nature of fintech and historical context
- Technology and finance have a long symbiotic relationship; advances in information and computer technologies and changing customer expectations are blurring traditional boundaries among intermediaries, markets, and new service providers.
- Some fintech applications, like mobile money, have been tested in many emerging and developing countries and demonstrate how even simple technologies can aid large-scale financial inclusion and development.
- The paper adopts a broad interpretation of fintech to describe advances in technology that have the potential to transform provision of financial services, spurring new business models, applications, processes, and products.

### Opportunities highlighted
- Fintech holds the promise of:
  - reducing costs and frictions,
  - increasing efficiency and competition,
  - narrowing information asymmetry,
  - broadening access to financial services, especially in low-income countries and for underserved populations.
- Potential contributions include:
  - supporting broader economic development and inclusive growth,
  - facilitating international payments and remittances,
  - simplifying and strengthening compliance and supervisory processes.
- Authorities are exploring regulatory approaches to allow experimentation and information exchange (e.g., sandboxes, incubators, accelerators, innovation hubs).

### Risks and policy concerns
- National authorities are concerned about potential risks to the financial system and customers, including:
  - price volatility of traded crypto-assets,
  - threats to consumer and investor protections,
  - potential for regulatory arbitrage and contagion within and across borders,
  - adequacy of existing financial safety nets (including lender-of-last-resort functions).
- Emerging technologies and business models can complicate legal and regulatory clarity and consistency across borders.
- Managing cyber risks is vital for operational resilience as interconnections increase multiple points of entry.
- Adoption may pose transition challenges requiring policy vigilance to ensure resilience and inclusiveness.

### Financial integrity and AML/CFT considerations
- Some fintech applications raise new risks of criminal activity (e.g., money laundering, fraud, terrorist financing) via new payment methods.
- Some technologies can strengthen financial integrity, for example:
  - facilitating customer due diligence (CDD) via digital IDs,
  - assisting regulators with software solutions for risk-based AML/CFT supervision.
- Robust IT security frameworks reduce opportunities for cyber fraud and related criminal activities.

### International monitoring and coordination
- International bodies (FSB, BCBS, CPMI, IOSCO, IAIS, FATF) have examined fintech implications and issued priorities, considerations, and guidance (including on AML/CFT for new payment methods).
- Calls for greater international coordination exist; cooperation is taking shape (e.g., bilateral fintech Memoranda of Understanding between regulatory agencies).
- A more coordinated approach that brings together industry and regulators of finance, technology, and competition—within countries and across borders—would help foster opportunities while mitigating regulatory arbitrage and cross-border contradictions.

### Purpose and scope of the Agenda
- The Agenda responds to calls from IMF and World Bank membership and outlines high-level considerations for policymakers and the international community.
- Focus: implications of fintech for the financial sector, reflecting IMF and World Bank near-universal membership and comparative competencies.
- Overarching elements have broad relevance but should be tailored to national circumstances and the specific financial services considered (e.g., credit, savings, insurance, payments).
- The Agenda does not represent the IMF or World Bank work program nor provide specific policy advice; it offers a framing to support further learning and ongoing work.
- Considerations apply to both conventional and Islamic financial instruments and products.

### Institutional roles and next steps
- IMF focus areas (through surveillance and capacity development work):
  - implications of fintech for cross-border capital flows,
  - national and global monetary and financial stability,
  - evolution of the international monetary system (IMS),
  - the global financial safety net (GFSN).
- World Bank initial focus areas include:
  - enabling reforms and capacity building to adopt fintech solutions to deepen financial markets,
  - enhancing responsible access to financial services,
  - improving cross-border payments and remittance transfer systems.
- The World Bank will draw on the International Finance Corporation’s growing experience and sees the Fintech agenda as contributing to foundations of the digital economy.
- IMF and World Bank staff will work closely with relevant international bodies and SSBs; as standards and best practices are developed by SSBs, staff will incorporate them into IMF and World Bank work.

### Elements of the Bali Fintech Agenda (summary headings)
- I. Embrace the Promise of Fintech
  - Welcome rapid advancements and prepare to capture benefits.
- II. Enable New Technologies to Enhance Financial Service Provision
  - Develop foundational infrastructures and ensure open, affordable access and conducive policy environments.
- III. Reinforce Competition and Commitment to Open, Free, and Contestable Markets
  - Ensure level playing field, promote innovation, consumer choice, and access to quality services.
- IV. Foster Fintech to Promote Financial Inclusion and Develop Financial Markets
  - Overcome reach, customer information, and commercial viability challenges to expand inclusion and market development; note statistic: an estimated 1.7 billion adults globally do not have access to the formal financial economy.
- V. Monitor Developments Closely to Deepen Understanding of Evolving Financial Systems
  - Enhance monitoring frameworks, extend data-collection powers, automate data collection and analysis, and promote information-sharing.
- VI. Adapt Regulatory Framework and Supervisory Practices for Orderly Development and Stability
  - Provide regulatory certainty, review and modify frameworks where necessary, implement international standards (e.g., Basel Core Principles), and embed corporate governance principles for new providers and services.

*Source: INTRODUCTION, THE BALI FINTECH AGENDA—BACKGROUND PAPER, World Bank Group and International Monetary Fund.*

### introduction or adaptation of regulation should be assessed based on the identification of market

### introduction or adaptation of regulation should be assessed based on the identification of market

### Regulation and supervisory approach
- 35. Regulation of new activities and innovative business models should be proportionate to their risks, in order not to stifle innovation.
  - Apply proportionate regulatory, governance, and disclosure requirements to support innovation while mitigating risks.
  - Facilitate safe market entry through temporarily restricted authorization schemes (such as sandboxes) and restricted licensing schemes.
  - Assess whether outsourcing frameworks and data-privacy regulations are technology-neutral or need revision (example: cloud computing).
- 36. Technological advances may support the effectiveness and efficiency of regulation.
  - Potential improvements: machine learning, automated data collection supported by enhanced Legal Entity Identifiers, big data analysis, machine-readable regulations.
  - Attendant issues to manage:
    - (a) data quality, standardization, and volume bring operational challenges;
    - (b) over-reliance on quantifiable signals and risks may result in misguided decisions;
    - (c) homogeneity of approaches and models may increase procyclicality;
    - (d) potential misuse of fintech to circumvent regulatory requirements.
- 37. Keeping up with market developments may be challenging for regulatory authorities.
  - Ensure staff knowledge, skills, and tools remain relevant and effective.
  - May entail additional training and recruitment of specialized staff.
  - Strong international supervisory cooperation facilitates knowledge transfer and sharing of best practice.
- 38. Countries should formulate a holistic policy response, building on guidance provided by SSBs.
  - Review adequacy of regulatory framework and perimeter based on assessments of financial stability risks, misconduct, and operational resilience (including cybersecurity).
  - If modifications are needed, consider:
    - a. Regulation should be technology-neutral and target externalities, financial stability risks, misconduct, and consumer protection; support competition and financial inclusion.
    - b. Regulation should be proportionate and adaptable, seeking international consistency to avoid cross-border arbitrage.
    - c. Explore potential use of fintech solutions by both firms and supervisors.
    - d. Assess current staffing and training models; additional specialized skills may be needed.

### Safeguarding financial integrity (AML/CFT)
- VII. Safeguard Financial Integrity — identify, understand, assess, and mitigate fintech-related risks of criminal misuse and use technologies to strengthen AML/CFT compliance.
- 39. ML/TF and related crimes can significantly undermine economic and financial stability; implement sound AML/CFT frameworks in line with the FATF 40 Recommendations.
- 40. Some fintech applications pose new threats to financial integrity.
  - Crypto-assets typically present higher potential of misuse for ML/TF, fraud (including cyber fraud), tax evasion, and other illicit activities.
  - Decentralized nature, global reach, absence of regulated intermediaries challenge whom to regulate.
  - Varying degrees of anonymity or “pseudo-anonymity” impede regulatory action.
  - Increased transaction complexity constrains identification of beneficial owners and criminal activity.
- 41. National responses vary: monitor; adapt AML/CFT frameworks; ban specific activities (example: “initial coin offerings”).
- 42. FATF actions:
  - Focus on “new payment products and services” and “virtual currencies” (crypto-assets).
  - Recommend AML/CFT efforts focus on intersection points between crypto-assets and traditional financial sector (e.g., crypto-asset exchanges).
  - May require exchanges to apply “preventive measures” (e.g., CDD, suspicious transaction reporting).
  - As cashing out becomes less necessary, may need to regulate service providers operating entirely within crypto space (e.g., certain wallet providers).
- 43. Regtech and Suptech could strengthen AML/CFT:
  - Identity verification technology (including biometrics).
  - Blockchain-based KYC repositories accessible to multiple users.
  - Data analytics for continuous risk-monitoring and identification of suspicious transaction patterns.
- 44. Actions to address financial integrity risks:
  - a. Identify, understand, and assess ML/TF risks; apply AML/CFT measures commensurate with risks; responses should be proportionate and reflect country circumstances.
  - b. Identify and encourage use of fintech products and services that strengthen AML/CFT.
  - c. Develop institutional capacity and ensure adequate communication with fintech providers; regular dialogue facilitates capacity building and private-sector awareness of AML/CFT obligations.

### Modernizing legal frameworks
- VIII. Modernize Legal Frameworks to Provide an Enabling Legal Landscape.
- 45. Sound legal frameworks provide stability, clarity, and predictability; legal certainty can be undermined if frameworks do not keep pace with new technology-driven business models and decentralized protocols.
- 46. Consider whether broad-based legal principles need refinement for modern contexts (examples):
  - Formation, validity, and enforcement of contracts or signatures executed through electronic signatures and automated processes like “smart contracts.”
  - Suitability of existing laws governing ownership of data and insolvency and bankruptcy.
- 47. Modernization may require supplementing gaps and clarifying ambiguities specific to fintech activities.
  - Example: legal uncertainty about treatment of balances held under non-traditional account arrangements (e.g., special deposit account arrangements where a third party holds/releases funds conditioned on an event) can introduce risks, especially under insolvency law.
  - Similar uncertainty may arise regarding settlement finality, including in blockchain settings.
- 48. An enabling legal framework benefits from predictable legal principles and greater harmonization across jurisdictions.
  - Harmonize approaches in payments law and in data usage, privacy, and security to enhance legal certainty while recognizing diversity of legal frameworks.

### Central banking, monetary transmission, and financial stability
- IX. Ensure the Stability of Domestic Monetary and Financial Systems.
- 49. Fintech blurs boundaries among intermediaries, digital service providers, nonbank financial companies, and banks, affecting central bank capacity to implement monetary policy and supervisory agencies’ ability to safeguard financial stability.
- 50. Potential impacts on monetary transmission:
  - Fintech can change any segment of transmission: balance-sheet channel, bank-lending channel, risk-taking behavior, role of banks in payments, and demand for central bank liquidity.
  - Policymakers may need to adapt operational frameworks of monetary policy to ensure effective transmission.
- 51. Fintech offers opportunities and raises risks for central banks:
  - a. Some central banks consider issuing “central bank digital currency” (CBDC) to address decline in cash use, maintain demand for central bank money, reduce cash maintenance costs, and improve financial inclusion; CBDC design could affect commercial bank funding sources.
  - b. Central banks are exploring fintech applications to improve and expand payments systems (example: DLT assessed for efficiency and resilience).
  - c. Safeguarding financial stability could become more challenging: fintech-enabled multiple payment systems could both improve resilience and amplify risks at times of stress; determination of systemically important entities may need expansion to include nonbank institutions and entities providing critical fintech infrastructure.
  - d. Role of lender of last resort and central bank support may need re-examination given decentralization and shift outside traditional banking perimeters; possible legislative and regulatory adjustments.
  - e. Implications for financial safety net arrangements (e.g., deposit insurance scope and coverage, crisis management and resolution of systemic fintech firms).

### Financial and data infrastructure, operational resilience, and cybersecurity
- X. Develop Robust Financial and Data Infrastructure to Sustain Fintech Benefits.
- 52. Robust digital infrastructure is necessary for operational resilience and to preserve confidence.
- 53. Fintech increases IT dependencies and operational risks:
  - Effective governance and risk-management processes required.
  - Greater reliance on technology creates interdependencies among financial institutions, technology providers, and others.
  - Outsourcing to third-party providers can place operational risks on incumbents; many third parties may fall outside the regulatory perimeter.
- 54. Economies of scale may increase concentration risks and interconnectedness, raising domestic and cross-border systemic risk concerns.
- 55. Cybersecurity is paramount; integrate cybersecurity into new processes from the start and adopt robust standards to achieve minimum cyber resilience across the financial services supply chain.
- 56. Robust business continuity and recovery plans are essential: back-up systems, incident response plans, regularly tested with realistic failure scenarios.
- 57. Increased digitalization heightens the need for strong frameworks to protect individual and institutional data.
  - Essential components: clarity of data ownership; safeguards for confidentiality, availability, and integrity; privacy considerations; ethical use of data; accountability for data breaches.
- 58. Steps for authorities to strengthen operational resilience:
  - a. Encourage embedding cybersecurity and operational risk management into enterprise-wide frameworks; build upon industry standards issued by SSBs.
  - b. Promote robust outsourcing arrangements with due diligence, risk management, monitoring, defined responsibilities, service levels, and audit rights.
  - c. Monitor and manage domestic and cross-border concentration risk.
  - d. Ensure robust data-governance frameworks covering ownership, privacy, confidentiality, integrity, availability, and ethical use.
  - e. Additional capacity and specialized skills may be needed to supervise operational and cybersecurity risks.

### International cooperation, surveillance, and capacity building
- XI. Encourage International Cooperation and Information-Sharing.
  - 59. As technologies operate across borders, international cooperation is essential to ensure effective regulation and to avoid a “race to the bottom.”
  - 60. Sharing experience and best practices helps guide effective regulatory frameworks; institutions with universal membership (IMF, World Bank) can gather diverse country inputs.
  - 61. Countries can support international collaboration by:
    - a. Sharing views and experiences in international fora and with the private sector.
    - b. Monitoring interconnectedness and enhancing cross-country communication.
    - c. Being ready to adapt policy responses to evolving financial systems.
    - d. Monitoring global market developments, emerging issues, and risks to ensure regulatory adequacy.
    - e. Building technical and regulatory capacities via international training and peer-learning.
- XII. Enhance Collective Surveillance of the International Monetary and Financial System.
  - 62. Strengthen bilateral and multilateral policy advice by IMF and World Bank to support inclusive growth, financial inclusion, and stability amid rapid technological change.
  - 63. Fintech could change cross-border savings and transactions, affecting capital and current-account flows; need to identify, monitor, and assess changes in capital flows.
  - 64. Blurring boundaries for origin and destination of international flows requires closer examination; IMF’s Institutional View remains applicable.
  - 65. Fintech could lead to a more decentralized, interconnected global financial system with uncertain resilience; digital assets and central bank-issued assets could accelerate a multipolar global economy.
  - 66. Fintech implications for the global financial safety net (GFSN) merit review, including reserve assets and reserve pooling mechanisms.
  - 67. IMF and World Bank can help members via capacity building and FSAPs to assess development, resilience, legal/regulatory frameworks, financial inclusion, and crisis management capacity; FSAP recommendations inform capacity development and other activities.
  - 68. Examples of actions to enhance surveillance and implementation of best practices:
    - a. Fill data and statistics gaps to strengthen risk monitoring amid technological progress.
    - b. Support efforts to strengthen financial integrity and resilience (policy advice, AML/CFT assessments, CD).
    - c. Provide CD and bilateral policy advice and financial solutions to strengthen legal, regulatory, and supervisory frameworks across central banking, insolvency, payments and settlement, taxation, financial development and inclusion, and consumer/investor protection.
    - d. Advise on management of potential risks to public-sector balance sheets and analyze macroprudential policy effectiveness.
    - e. Strengthen CD activities on technological and financial innovations including cybersecurity, leveraging strategic partnerships with donor countries.
    - f. Assess implications of fintech for capital flows and cross-border spillovers, including pace and sequencing of capital-flow liberalization consistent with the IMF’s Institutional View.
    - g. Assess fintech implications for the IMS focusing on exchange rate adjustment, reserve accumulation, and global rebalancing.
    - h. Maintain a strong and effective GFSN, including regional financing arrangements, focused on minimizing global imbalances and preventing contagion while reflecting fintech impacts on flows.
    - i. Proactively coordinate to address global risks and opportunities, foster effective supervision and credible cross-border resolution frameworks, and help countries enhance crisis preparedness using new technologies (AI, machine learning, big data analytics) in surveillance.

*The Bali Fintech Agenda — Background Paper (excerpts provided in content unit).*

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_Source: https://www.imf.org/-/media/files/publications/pp/2018/pp101118-bali-fintech-agenda.pdf_