{
  "title": "Framing the Debate on Fintech: Current Trends and Continuing Policy Concerns",
  "publication": "IMF News, April 1, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/04/01/sp040119-framing-the-debate-on-fintech-current-trends-and-continuing-policy-concerns",
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  "summary": "Remarks by Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department, IMF at the IMF Fintech Roundtable, Washington, D.C",
  "publishDate": "2019-04-01",
  "sections": [
    {
      "heading": "Overview and context",
      "content": "- Remarks by Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department, IMF at the IMF Fintech Roundtable, Washington, D.C\n- Date: April 1, 2019\n- Summit purpose: share insights about the future of financial technologies and the policy issues they raise; follow up on the launch of the “Bali Fintech Agenda.”\n- High-level message:\n  - Authorities should welcome Fintech for its potential to increase inclusion and efficiency.\n  - Successful adoption requires building skills and expertise, educating consumers and investors, and creating enabling foundational infrastructure.\n  - Continuous monitoring and active dialogue with industry and international peers are essential to assess emerging risks and form timely policy responses."
    },
    {
      "heading": "Recent developments highlighted (March headlines and examples)",
      "content": "- Legal and regulatory actions:\n  - China’s central bank: “gradually set up a system of rules for the regulation of Fintech… and create a favorable policy environment for Fintech development.\"\n  - Japan: cabinet approved draft amendments to financial instruments and payment services laws to cap leverage in virtual currency margin trading.\n  - Mexico: central bank proposed regulations under a new Fintech law to limit cryptocurrency exchanges.\n  - Switzerland: Federal Council initiated a consultation to adapt federal law to Distributed Ledger Technology (DLT).\n  - Hong Kong: issued its first batch of on-line banking licenses; virtual banks to face the same supervisory requirements as conventional banks.\n- Central bank digital currencies (CBDCs):\n  - Two central banks — the Eastern Caribbean Central Bank and the Central Bank of the Bahamas — advanced plans to conduct blockchain-based CBDC pilots.\n  - The Riksbank of Sweden moved forward with its second interim report into the e-krona.\n  - The Bank for International Settlements expressed concerns about potential impact on monetary policy and possible “run risk.”\n- Cross-border payments and transfers:\n  - Six international banks announced plans to issue “stablecoins” on IBM’s World Wire to enable faster, cheaper remittances/FX transfers for regulated institutions.\n  - Western Union partnered with Thunes to enable direct transfers to mobile wallets globally using blockchain technology.\n- Payments and Financial Market Infrastructures (FMIs):\n  - Deutsche Bundesbank and Deutsche Börse completed performance tests of blockchain-based securities settlement prototypes.\n  - Swiss operator SIX Group selected R3’s Corda Enterprise for its digital asset trading, settlement, and custody service."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Enable and prepare:\n  - Build foundational infrastructure: broadband internet, mobile data services.\n  - Promote digitization across government and broader service economy.\n  - Encourage more efficient payments systems and open, contestable markets to support competition.\n  - Promote financial inclusion and development.\n- Monitor, engage, and adapt:\n  - Maintain ongoing dialogue with industry (innovators and incumbents).\n  - Continuously monitor developments to assess risks and enable timely policy responses.\n  - Adapt legal and regulatory frameworks to ensure robustness while allowing beneficial innovation.\n- Address gaps and emerging risks:\n  - Many risks can be addressed by existing frameworks, but new players (non-banks, ICT providers) and cross-sectoral products require adapting prudential regimes and modernizing legal frameworks.\n  - Some Fintech business models or products (crowdfunding platforms, e-money, pre-paid cards, crypto assets) could enable circumvention of current controls or be used for criminal purposes, posing threats to financial integrity.\n  - Fintech reshapes market segments that transmit monetary policy — central banks and supervisors must assess implications for monetary policy and financial stability.\n- Data and operational resilience:\n  - Develop robust financial and data infrastructure to support operational resilience and preserve confidence.\n  - Address issues: data ownership and privacy, cyber security, operational and concentration risks, business continuity, consumer protection.\n- International cooperation:\n  - Deepen international dialogue to exchange information and share experiences.\n  - IMF and World Bank can assist collective surveillance and capacity building, collaborating with other international bodies to promote global growth and financial stability."
    },
    {
      "heading": "Regulatory approaches and innovation tools",
      "content": "- Sandboxes and alternatives:\n  - About 33 sandboxes exist in advanced economies and Emerging Market and Developing Economies; a few multi-jurisdictional sandboxes aim to promote cross-border harmonization.\n  - Growing consensus: sandboxes are not a panacea; it is too early to determine their success.\n  - Use of alternative tools is increasing: single points of contact, accelerators, innovation hubs.\n- Key regulatory questions posed:\n  - How will Fintech regulations evolve?\n  - How successful have sandboxes been so far?\n  - Where did sandboxes succeed and fail?\n  - How useful are sandboxes compared to other instruments?"
    },
    {
      "heading": "Central Bank Digital Currencies (CBDCs)",
      "content": "- Current engagement:\n  - “Less than one-quarter of central banks around the world are now actively exploring the possibility of issuing CBDCs, and only four pilots have been reported.”\n- Core policy questions:\n  - Why consider issuing CBDCs, and under what circumstances should they be issued?\n  - What are the design options and their impact?\n  - What are the risks to central banks?\n- Research sharing:\n  - Session planned to present conclusions of in-depth research from three countries that have invested heavily in exploring CBDC issues."
    },
    {
      "heading": "Payments, DLT, and FMIs — experiments and questions",
      "content": "- Observed trends in retail payments: move toward real-time settlements, flatter structures, continuous operations, and global reach.\n- DLT experimentation across FMIs: examples include Jasper I & II (Canada), Khokha (South Africa), Stella I (Euro area and Japan); DLT prototypes for securities settlement and other FMIs.\n- Key questions for assessment:\n  - What is the scope of current or upcoming DLT for broad adoption?\n  - How do DLT systems compare to newer, real-time centralized payments systems (using a cost-benefits analysis)?\n  - What are the potential risks?"
    },
    {
      "heading": "Legal frameworks and gaps",
      "content": "- Status:\n  - Existing legal frameworks inadequately address many Fintech aspects; diversity in progress and approach to legal reform.\n  - Some adaptation achieved for crypto assets and mobile money; less progress on financial-sector private law (payments and securities transfer law, solvency, other concerns).\n- Legal questions to be examined:\n  - Legal status of novel Fintech concepts (e.g., smart contracts; claims on non-bank entities such as telecom companies providing mobile-initiated value-transfer services).\n  - Legal basis for activities tied to technological change (e.g., treatment of crypto-asset balances in a custody service provider’s bankruptcy).\n  - Allocation of risk of loss under applicable law (e.g., treatment of operational vulnerabilities in underlying technology)."
    },
    {
      "heading": "Data governance and cybersecurity",
      "content": "- Challenges:\n  - Proliferation of data increases its value and raises implications for efficiency, stability, inclusion, and rights.\n  - Significant diversity in approaches to data governance: data rights, localization, privacy, international coordination.\n  - Recent data breaches highlight cybersecurity risks and common gaps in mapping cyber risks in the financial sector.\n- Session focal points:\n  - Implications of different data-governance frameworks for market efficiency, access, financial stability, rights to data, portability, interoperability, and protection.\n  - How to strengthen cybersecurity to increase resilience of financial systems."
    },
    {
      "heading": "Roundtable structure and priorities",
      "content": "- Agenda themes for the meeting:\n  - The regulatory approach to Fintech\n  - Central Bank Digital Currencies\n  - Payments and settlement systems\n  - Legal frameworks\n  - Data governance\n- Expected outcomes:\n  - Peer-to-peer, in-depth dialogue and information-sharing among IMF member countries.\n  - Share national experiences and discuss policy responses in line with the Bali Fintech Agenda.\n\nRemarks by Tobias Adrian, IMF Fintech Roundtable, April 1, 2019.\n\n---\n\n\n References\n\n- Tobias Adrian\n- Canada and the IMF\n- South Africa and the IMF\n- Speeches\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/04/01/sp040119-framing-the-debate-on-fintech-current-trends-and-continuing-policy-concerns"
    }
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    "Published: April 1, 2019",
    "Remarks by Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department, IMF at the IMF Fintech Roundtable, Washington, D.C",
    "Date: April 1, 2019",
    "Summit purpose: share insights about the future of financial technologies and the policy issues they raise; follow up on the launch of the “Bali Fintech Agenda.”",
    "High-level message:",
    "Legal and regulatory actions:",
    "Central bank digital currencies (CBDCs):",
    "Cross-border payments and transfers:",
    "Payments and Financial Market Infrastructures (FMIs):",
    "Enable and prepare:",
    "Monitor, engage, and adapt:",
    "Address gaps and emerging risks:",
    "Data and operational resilience:",
    "International cooperation:",
    "Sandboxes and alternatives:",
    "Key regulatory questions posed:",
    "Current engagement:",
    "Core policy questions:",
    "Research sharing:",
    "Observed trends in retail payments: move toward real-time settlements, flatter structures, continuous operations, and global reach.",
    "DLT experimentation across FMIs: examples include Jasper I & II (Canada), Khokha (South Africa), Stella I (Euro area and Japan); DLT prototypes for securities settlement and other FMIs.",
    "Key questions for assessment:",
    "Status:",
    "Legal questions to be examined:",
    "Challenges:",
    "Session focal points:",
    "Agenda themes for the meeting:",
    "Expected outcomes:",
    "[Tobias Adrian](http://www.imf.org/external/np/bio/eng/ta.htm)",
    "[Canada and the IMF](http://www.imf.org/external/country/CAN/index.htm)",
    "[South Africa and the IMF](http://www.imf.org/external/country/ZAF/index.htm)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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