Opening Remarks: Vienna Conference on the Bali Fintech Agenda
IMF News, January 28, 2019
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- Authors: Tobias Adrian Vienna
- Published: January 28, 2019
Context and objectives of the Bali Fintech Agenda (BFA)
- BFA provides a high-level conceptual framework to tie together the many challenges inherent in the digitalization of financial services.
- The Bank and the Fund have begun operationalizing the agenda:
- Conducted a survey to provide insights into membership priorities.
- Survey results, combined with a summary of recent Fintech developments and regulatory responses, will be presented in a formal paper to the Executive Board.
- Dialogue on Fintech issues continues through Article IV consultations and Financial Sector Assessment Program reports.
- Collaboration with standard-setters in their respective areas.
Key Fintech developments and opportunities discussed
- Private-sector innovation is driving rapid and non-linear developments (examples cited: cryptocurrency price gyrations; rise and fall of Initial Coin Offerings).
- Promising area: Financial Inclusion
- Fintech can make payments and access to credit easier (example: Kenya’s M-Pesa mobile-phone wallet).
- Non-bank firms (telecom operators, lending platforms) are delivering access at scale, raising regulatory questions because traditional financial regulation focused on licensed institutions (principally banks).
- Cross-border payments
- Potential for large cost savings and time efficiency.
- New entrants include telcos, Big Tech, and other firms; example: M-Pesa users in Kenya can now make payments to China’s WeChat users.
- Policy challenges require coordinated international frameworks and include:
- Improving payments infrastructure to enable greater efficiency.
- Broadening access to, and reviewing oversight of, this infrastructure for new entrants.
- Ensuring interoperability of systems.
- Overseeing and addressing the transformation of the banking business due to new technologies.
- Mitigating the risk of money laundering in new payment channels.
- Central Bank Digital Currencies (CBDCs)
- Cited BIS survey result: 70 percent of central banks are currently involved in — or soon will be involved in — this complex area, with one-third of them now seeing the issuance of CBDCs as likely.
- Discussion to explore costs and benefits of CBDCs and implications for “banking as we know it.”
Risks, regulatory challenges, and supervisory needs
- New technologies and market developments introduce new risks requiring adjustments to policy and supervisory frameworks.
- Supervisory and regulatory monitoring must evolve:
- Classic prudential reporting frameworks need to be complemented by new data-collection frameworks covering new entrants and new channels; legal bases for such data collection may not yet exist.
- Regulatory perimeter questions:
- Appropriate regulatory approach to crypto assets and new products/activities.
- Assessment of stability implications and risk mitigation.
- Need for strong institutional and legal frameworks to guarantee financial integrity.
- Data infrastructure, privacy, and cyber risk concerns are central to providing robust central-bank and supervisory services.
Policy recommendations and next steps (three specific steps)
- First: Jurisdictions should begin consultations with all relevant parties (central banks, regulators, private-sector participants) to develop country-specific approaches that reflect comparative advantages and specific situations; priorities will differ (examples of priorities: Anti-Money Laundering/Countering the Financing of Terrorism issues; financial inclusion; infrastructure).
- Second: Pursue regional consultations and cooperation efforts (noted that Tom Richardson will address the role of the Joint Vienna Institute).
- Third: Commit to sharing knowledge and engaging in more events to reach beyond individual country concerns; pursue a robust program of publications by respective institutions to promote broader knowledge-exchange.
Conference format and engagement
- Conference to reflect on the relevance of BFA elements to each economy’s conditions, share experiences, voice concerns, explore challenges, and discuss policy approaches.
- Panel discussions to cover Fintech developments, private-sector perspectives, Financial Inclusion, cross-border payments, CBDCs, and implications for central-bank services.
- Final session: roundtable for participants to share experiences and ask questions.
- Speaker expectation: continued engagement over the months to come to advance the agenda; discussions to take place over the next two days.
Opening Remarks: Vienna Conference on the Bali Fintech Agenda — Tobias Adrian; Vienna, Austria; January 28, 2019.