This course will give participants an overview of new digital finance initiatives undertaken by global regulatory bodies, development banks and NCAs worldwide. It also explores possible channels to enhance transnational cooperation and address existing regulatory gaps from the interplay between digitalisation, new players, and risks.
Total length: Approx. 8.5 hrs (Five recorded classes: 1h lectures each, and three live lessons: 45 min lectures plus 20 min Q&A each).
Session 0: Introductory Session
This introductory session will revisit digital finance from a historical perspective and the new frontiers of digital finance developments in a highly interconnected context of global supervisors’ current initiatives and mandates. Technological developments and the rapid digitisation of finance have brought significant changes in the functioning of the financial system, as well as new opportunities and risks for the financial sector, especially in terms of the provision of services and the functioning of markets. The digital finance trend has also been accompanied by emerging initiatives to increase risk management capacity, correct market failures, and enhance regulatory and supervisory cooperation to deal with these challenges, given the cross-border nature of these risks.
Session 1: Global Regulation and Supervision of Crypto Assets
The borderless nature of crypto assets makes international regulations fundamental policy actions to mitigate their risks. This body of internationally endorsed measures promotes the consistency and comprehensiveness of regulatory, supervisory, and oversight approaches to crypto-asset activities and markets and strengthens international cooperation, coordination, and information sharing. This session reviews why an internationally consistent regulatory approach is so essential and analyses the high-level recommendations seeking to promote consistent and effective regulation, supervision and oversight of global stablecoin arrangements (GSCs) across jurisdictions to address the potential financial stability risks they pose.
Session 2: Digitalisation and Financial Inclusion
Small businesses are critical for economic development, employment, and innovation. With a quickly growing micro, small and medium-sized (MSME) sector worldwide, it is vital to address the MSME finance. Digital lending and capital raising fintech firms have increasingly been servicing the MSME sector, becoming essential players in closing the MSME financing gap and can play an important role in driving MSME growth. This session explores the current regulatory landscape as ‘access to finance’ mandates become increasingly crucial to policymakers worldwide. Fintech-focused regulation and policies must be considered to support the small business sector across the region. The fintech ecosystem continues to develop rapidly, and regulators and regional supervisors endeavour to keep pace with developments.
Session 3: BigTech and Policy Challenges: Development of BigTech in Financial Services
One of the key drivers behind the advent of digital finance is the entry of large providers of digital services (BigTechs) into the financial sector. These firms facilitate the provision of financial services by incumbents, e.g., via Pay platforms and cloud service provision, and some are increasingly providing financial services interdependently and along with their commercial. BigTechs entering financial markets with their “DNA loop” pose specific challenges in applying the “same activity, same risk and same rules” approach. However, these activities pose opportunities and risks that current supervisory practices may not effectively address. This session will discuss the development of BigTech in financial services, the key considerations in the approach to regulating these newcomers, which includes the need for coordination between prudential and conduct regulators, the acknowledgement of the limitations of current regulation for new risks and their designations as systemically key groups.
Session 4: A Global Cybersecurity Framework
This session analyses the challenges of promoting global financial cyber resilience through operational collaboration. It focuses on the ongoing global efforts to develop common standards and achieve an agreement on prioritisation and implementation. It focuses on the UN’s Comprehensive International Convention on Countering the Use of Information and Communications Technologies for Criminal Purposes, the World Bank’s Cybersecurity Multi-Donor Trust Fund, the WEF’s International Strategy to Better Protect the Global Financial System against Cyber Threats, and how the EU emerging framework could fit into these initiatives.
Session 5. Instant Payments: Regulatory Innovation and Payment Substitution
Instant payments (IP) improve cost efficiency and operating effectiveness while at the same time reducing payment system risk. Supervisors and regulators in different advanced and developing jurisdictions have had various roles of catalysing, overseeing, or operating instant payment systems. This shared session reviews the relevance and opportunities of fast payments, the risks of these technologies and how emerging economies have dealt with these. The second part covers the case study of the Brazilian IP Pix in great detail, showing the institutional context, the overview of this payment system, the success factor, and the role of the public-private partnerships in this initiative.
Session 6. CBDC and Stablecoins: Applications and Challenges
Arguably, multi-CBDC arrangements can enhance efficiency while lowering transaction costs. Yet, to empower multi-CBDC arrangements, central banks must develop interoperable systems. Moreover, GSCs could be widely adopted across multiple jurisdictions, potentially rapidly reaching a critical and systemic scale. CBDC and GSCs adoption scenarios will impact national and international supervisory approaches. To cover these topics, this spit session first reviews CBDC developments worldwide, the frictions in cross-border payments these digital asses might help to reduce, and their design options more suitable. In the second part, the course provides an overview of GSC, including use cases and types. Moreover, it discusses why these digital assets are of interest to policymakers: the contagion risks to traditional financial markets and the policy implications to preserve financial stability and to ensure sound governance, safety and integrity of payment infrastructure, operational resilience, and consumer protection.
Session 7: Consumer protection and financial innovation
While financial consumer protection is a long-standing public policy objective, financial authorities have become progressively concerned about it in response to the global financial crisis. It represented a wake-up call and highlighted the relevance of protecting consumers and ensuring fair and responsible treatment in the financial marketplace. Since then, international organisations have developed guiding principles and policy recommendations to promote comprehensive and effective frameworks for financial consumer protection, and financial authorities have increasingly adopted and prioritised financial consumer protection as a critical supervisory area. This session describes the main risks to consumers, examining how emerging financial market trends reshape the market structure and the manifestation of consumer risks. It also discusses the relevance of the prominent frameworks and practical approaches for financial consumer protection to contribute to a safer digital financial services ecosystem with a higher degree of consumer protection.