{
  "title": "How Policymakers Should Regulate Cryptoassets and Fintech - Straight Talk - IMF F&D Magazine",
  "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2018/06/how-policymakers-should-regulate-cryptoassets-and-fintech-straight",
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  "summary": "Christine Lagarde offers a regulatory approach to fintech, and how best to guard against emerging risks. Distributed ledger technology, like blockchain, underpins cryptoassets, and has the potential to improve our lives.",
  "sections": [
    {
      "heading": "Fintech promise and observed applications",
      "content": "- Distributed ledger technology, like blockchain, underpins cryptoassets and \"has the potential to improve our lives.\"\n- Examples of fintech delivering financial services:\n  - Mobile payment systems in Kenya and China have brought millions of previously \"unbanked\" people into the financial system.\n  - Peer-to-peer lending in Latvia, Brazil, and elsewhere has opened up a new source of credit for small businesses.\n  - Advances in artificial intelligence can enhance fraud protection, regulatory compliance, expand access to financial services, and deepen financial inclusion.\n- Potential uses of distributed ledger technology highlighted:\n  - Faster and cheaper transactions (from trading securities to remittances).\n  - Secure storage of records such as diplomas and real estate deeds.\n  - Automatic execution of \"smart contracts.\"\n- Acknowledged misuse:\n  - The technology \"has also been used for illicit purposes.\""
    },
    {
      "heading": "Risks and regulatory objectives",
      "content": "- Primary risks regulators must address:\n  - Consumer and investor protection against fraud.\n  - Combating tax evasion, money laundering, and the financing of terrorism.\n  - Protecting the integrity and stability of the financial system.\n  - Emerging cybersecurity risks.\n- Regulatory trade-off: protect consumers and financial stability while avoiding stifling innovation that benefits the public.\n- Recommended regulatory posture:\n  - Constructively engage with market participants to stay abreast of benefits and identify emerging risks.\n  - Develop a forward-looking regulatory framework requiring creativity, flexibility, and new expertise.\n  - In some cases apply existing regulations; in others, design new approaches as distinctions between entities and activities break down."
    },
    {
      "heading": "Lessons from the financial crisis (three lessons)",
      "content": "- Lesson number one: \"trust is the foundation of the financial system, but it is a fragile foundation that can easily be shaken.\"\n  - Policy implication: ensure new technologies do not undermine trust.\n- Lesson number two: \"risk accumulates in unexpected places.\"\n  - Policy questions raised: Will a more decentralized financial system be more stable, or less? Will risk be more dispersed? Will diminished role of traditional intermediaries mean emerging risks are more likely to go undetected?\n- Lesson number three: \"in a globalized world, financial shocks quickly reverberate across national boundaries.\"\n  - Policy implication: responding to crises requires concerted global action; strengthen resilience and international cooperation."
    },
    {
      "heading": "Global coordination and current international work",
      "content": "- Risk of uncoordinated national responses: activity could migrate toward more lightly regulated jurisdictions in a \"race to the bottom.\"\n- International bodies and actions noted:\n  - The Financial Action Task Force has provided guidance on addressing money-laundering and terrorist-financing risks associated with crypto assets.\n  - The Financial Stability Board (FSB) is studying ways to monitor the growth of crypto assets to identify emerging threats to stability.\n- G20 engagement:\n  - In March, a meeting of G20 central bankers and finance ministers agreed with the FSB’s assessment that crypto assets do not currently pose a threat to stability.\n  - The G20 also agreed that crypto assets could pose a threat at some point in the future and asked the FSB and other standard-setting bodies to continue their work and report on progress."
    },
    {
      "heading": "IMF’s role and operational approaches",
      "content": "- The IMF's comparative advantages:\n  - Serve as a forum for exchange of ideas and a catalyst for forging consensus.\n  - Monitor the economies and financial systems of its 189 members, help build institutional capacity, and offer advice on policies and regulatory structures.\n  - Leverage a global perspective to understand and advise on fintech and cryptoasset risks and opportunities.\n- Operational recommendations:\n  - Understand innovative technologies, learn from them, and consider adopting some to improve regulation, supervision, and surveillance.\n  - Do not delay action until all answers are clear; begin considering the regulatory framework of the future now.\n  - Use regulatory \"sandboxes\" (examples cited: Hong Kong SAR, Abu Dhabi, and elsewhere) to test new financial technologies in closely supervised environments.\n  - Maintain an open mind about crypto assets and financial technology because of both risks and potential to improve lives."
    },
    {
      "heading": "Key statements and rhetorical framing",
      "content": "- Historical analogy: 19th century anecdote of Alexander Graham Bell illustrates the disruptive and unpredictable nature of technological innovation.\n- Central admonition: \"We must guard against emerging risks without stifling innovation.\"\n- Closing counsel: \"When in doubt, just think of Alexander Graham Bell and his telephone.\"\n\nChristine Lagarde, \"A Regulatory Approach to Fintech,\" June 2018 — Straight Talk, F&D Magazine (author is a former IMF managing director).\n\n---\n\n Content in this bundle\n\n- التكنولوجيا المالية من منظور تنظيمي\n  - التكنولوجيا المالية من منظور تنظيمي (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - التكنولوجيا المالية من منظور تنظيمي (PDF){rel=\"external\" type=\"application/pdf\"}\n- Straight\n  - Straight (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Straight (PDF){rel=\"external\" type=\"application/pdf\"}\n- Откровенный разговор. Регулирование финансовых технологий – Финансы и развитие – июнь 2018 года\n  - Откровенный разговор. Регулирование финансовых технологий – Финансы и развитие – июнь 2018 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Откровенный разговор. Регулирование финансовых технологий – Финансы и развитие – июнь 2018 года (PDF){rel=\"external\" type=\"application/pdf\"}\n- A Regulatory Approach to Fintech\n  - A Regulatory Approach to Fintech (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - A Regulatory Approach to Fintech (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2018/06/how-policymakers-should-regulate-cryptoassets-and-fintech-straight"
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    "Authors: CHRISTINE LAGARDE",
    "Published: June 1, 2018",
    "Distributed ledger technology, like blockchain, underpins cryptoassets and \"has the potential to improve our lives.\"",
    "Examples of fintech delivering financial services:",
    "Potential uses of distributed ledger technology highlighted:",
    "Acknowledged misuse:",
    "Primary risks regulators must address:",
    "Regulatory trade-off: protect consumers and financial stability while avoiding stifling innovation that benefits the public.",
    "Recommended regulatory posture:",
    "Lesson number one: \"trust is the foundation of the financial system, but it is a fragile foundation that can easily be shaken.\"",
    "Lesson number two: \"risk accumulates in unexpected places.\"",
    "Lesson number three: \"in a globalized world, financial shocks quickly reverberate across national boundaries.\"",
    "Risk of uncoordinated national responses: activity could migrate toward more lightly regulated jurisdictions in a \"race to the bottom.\"",
    "International bodies and actions noted:",
    "G20 engagement:",
    "The IMF's comparative advantages:",
    "Operational recommendations:",
    "Historical analogy: 19th century anecdote of Alexander Graham Bell illustrates the disruptive and unpredictable nature of technological innovation.",
    "Central admonition: \"We must guard against emerging risks without stifling innovation.\"",
    "Closing counsel: \"When in doubt, just think of Alexander Graham Bell and his telephone.\"",
    "**التكنولوجيا المالية من منظور تنظيمي**",
    "**Straight**",
    "**Откровенный разговор. Регулирование финансовых технологий – Финансы и развитие – июнь 2018 года**",
    "**A Regulatory Approach to Fintech**"
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