1/25

FinTech Expectations

could support harmonised development of responsible FinTech

technologies/products/services across the planet and safe usage

2/25

“Ongoing political, economic, social, environmental and technological

developments are challenging many of our underlying assumptions.1”

“The Fourth Industrial Revolution is fundamentally transforming

societies, economies, and ways of doing business. Last but not least, as

people seek to reassert identities that have been blurred by globalization,

decision-making is increasingly influenced by emotions.2”

Klaus Schwab

Founder and Executive Chairman

World Economic Forum

1 Global Risks 2015, World Economic Forum (http://reports.weforum.org/global-risks-2015/)

2 The Global Risks Report 2017, World Economic Forum (https://www.weforum.org/reports/the-global-risks-report-

2017

3/25

Take-away cases

Case #1

Facebook is working on tech to let you type with your brain and 'hear with your skin'. The social

network is working on brain-computer-interface technology that "one day will let you

communicate using only your mind" according to CEO Mark Zuckerberg. The silent speech

project is part of Facebook's consumer hardware lab known as Building 8. "Eventually, we want to turn it into a wearable technology that can be manufactured at scale", Mark Zuckerberg Zuckerberg. (http://www.businessinsider.com/facebook-confirms-working-on-mind-reading-technology-2017-4

and

https://www.facebook.com/zuck/videos/vb.4/10103661167577621/?type=2&theater)

Case #2

Robot traders are being blamed for a currency rout which saw the pound plunge by six percent in

just two minutes in early Asian trading Friday. At one point the pound hit a 31-year record low of

$1.1841, before recovering to $1.24. The speculation is hitting confidence in sterling, which is now

seen as a marked target in the wake of hardline comments from the Conservative Party conference

on Britain's exit from the European Union.

(https://www.finextra.com/newsarticle/29562/robots-blamed-for-sterling-flash-crash)

Case #3

6 Practical Examples Of How Quantum Computing Will Change Our World. There’s a reason

Google, Microsoft, IBM and governments around the world continue to make significant

investments in quantum computing - they are counting on it to change the world by solving

problems that are intractable for today’s classical computers. Widespread adoption of quantum

computers (1) will put our current data encryption obsolete, (2) will shorten the learning curve for

artificial intelligence, (3) will determine viable drug options quicker and allow gene therapy and

personalized drug development, (4) will improve weather forecasting and climate change

predictions, (5) will help to streamline traffic control and (6) will open the door for amazing

developments in every field from financial services to our national security.

(https://www.forbes.com/sites/bernardmarr/2017/07/10/6-practical-examples-of-how-quantum-

computing-will-change-our-world/#5e78ee1380c1)

Case #4

According to Peru Consulting report Retail Banking IT - Turn to Face The Change, customer

needs are changing and unlike the older generation who may once have chosen a bank for life,

the experience-sensitive younger age group is clearly unafraid of switching. 38% of 18 to 24

year olds and 41% of 25 to 34 year olds set to change the bank that provides their main account.

The competitive threat is only likely to intensify over time, with younger people showing a

greater propensity to become GAFA customers than older generations.

4/25

In comparison, just 26% of 45 to 64 year olds are planning to take the plunge and switch providers.

(https://www.peruconsulting.co.uk/outcomes/research/peru-retail-banking-it-research)

Case #5

World Economic Forum raises critical (social and not only social) safety/security/surviving issues

in report Top 9 ethical issues in artificial intelligence, related to unemployment, inequality,

humanity, artificial, stupidity, racist robots, security, evil genies, robot rights. (https://www.weforum.org/agenda/2016/10/top-10-ethical-issues-in-artificial-intelligence/)

Case #6

The G20 Countries Should Engage with Blockchain Technologies to Build an Inclusive,

Transparent, and Accountable Digital Economy for All. Blockchains can improve public

oversight and strengthen economic resiliency. The G20 countries should support beneficial

private sector blockchain development by promoting the establishment of a global regulatory

sandbox for the most promising blockchain use cases establishment of a global regulatory sandbox

for the most promising blockchain use cases. The G20 should constitute and fund a Central

Banks Blockchain Consortium to study the monetary and fiscal policy implications of the

rise of cryptocurrencies and other blockchain technologies.

(http://www.g20-insights.org/policy_briefs/g20-countries-engage-blockchain-technologies-build-

inclusive-transparent-accountable-digital-economy/)

Other take away cases are resting in Annex.

5/25

Dear reader,

Firstly, Bitcoin as Money?3 drawn my attention to a possible new wave on developments and

financial innovation based on technology. Secondly, the number, variety and size of entities

involved in research and development projects aiming financial innovation and huge investments

in such projects supported initial assessment. Thirdly, large number of research and development

projects run by governments, central banks, technology giants/firms and start-ups aiming to deploy

blockchain concepts in financial services convinced me that we are facing a new revolution and I

decided to go ahead with the paper.

Our world has two complex and interconnected layers: real world (physical one) and virtual world

(cyber space)4. Digitalisation of (economic) processes brings lots of benefits, but risks also.

A wristwatch is used to make phone calls and it warns the house electrical system to turn on, when

the owner is near the house. Clothes are self-repairing when damaged, mirroring bio healing

process. High-tech cloves ring. A refrigerator orders milk to the store using internet connection

when family milk stock decreased or expired. A smart driverless car orders fuel (after it has

informed the passenger/"driver" on the best fuel supply on route to destination) when fuel is low.

A light bulb acts as a speaker and provides a wireless internet connection. A phone unlocks/locks

a car using WI-FI and cards unlock doors. Virtual reality is used in house hunting and car

industry. Television and augmented reality generate better experiences for in-side and out-side

sport enthusiasts. Cars, buildings, shoes and cloths, medical supplies, including drugs, are 3D

printings. Robots check-in guests in a hotel. Robots teach students. In order to fill in the short

list, a learning machine assesses resumes and checks candidates’ social media activity. The

future butler will announce “The dinner is printed!”. A flying robot supervises pizza delivery

drone traffic. A robot is your co-worker and partner.

3 Current Policy Perspectives No. 14-4, Federal Reserve Bank of Boston, September 2014

(https://www.bostonfed.org/publications/current-policy-perspectives/2014/bitcoin-as-money.aspx) 4 ISO/IEC 27032:2012 Information technology — Security techniques — Guidelines for cybersecurity

6/25

Some of these are recent realities of our world and some will become realities.

Modern economies are facing a new revolution, a financial innovation revolution. In order to

access financial services faster and cheaper, public, firms and governments rely on computer-based

applications, systems and devices provided by financial institutions or other entities, not necessary

associated to financial institutions, almost on daily basis. Due to the fact these applications,

systems and devices are managing high values and confidential data, technology used to deliver

and access financial services becomes more and more important. When comes to communication

offer, all communication devices and channels are in a constant competition to each other and

these have to adapt in order to better serve the communication needs and expectations or will

extinct. In our complex world, computers (regardless the shape and form) and computer

networks are the most reliable technology in pleasing the communication needs due to ability to

offer more information, faster, easier, at a cheaper price, in standard or tailor-made format,

more efficient, enhancing safety, transparency or privacy etc. which leads to a higher degree

of satisfaction and better informed decision processes for people and businesses.

As a natural consequence, applications, devices, systems, and communication between them

should be risk resilient.

Technological risks associated to highly complex systems and services used in delivering and

accessing financial services need to be addressed properly and worldwide by financial institutions,

technology developers, technical service providers, governments, parliaments and financial

authorities, including central banks, in order to stimulate innovation and competition and maintain

financial stability.

Building and, later on, enhancing risk resilience of technology used by financial institutions is a

complex never ending process that needs a clear long-term global cooperation among all

stakeholders.

7/25

Global risks5 evolution highlights the technological risks progress. There is always a global

technological risk above both impact and likelihood average and at least one above impact or like

likelihood average.

Artificial intelligence and expert systems (recognized as robo advisors), augmented reality,

authentication and/or payment wearable items, including tattoos and body implanted chips, big

data associated with predefine access (me-to-business - Me2B), blockchain, distributed ledger,

gamefication (pleasant customer experience), quantum technology and virtual reality are currently

most targeted concepts explored within research and development projects (publicly disclosed), in

order to use them in finance industry.

All current FinTech innovations are based on following three core principles or combination of:

reorganised data, reorganised data access and reorganised data store.

So, the paper aims (1) to remain technology neutral, (2) to increase awareness, (3) to enhance

risk management and risk resilience related to technology in "financial world", while risks

evolve, increase and become more interconnected and (4) to support harmonised responsible

development FinTech technologies/products/services across the planet and safe use.

5 Global Risks 2015-2018 editions, World Economic Forum

8/25

FinTech concept

There is no global agreement on the concept, yet. But, International Monetary Fund6, Financial

Stability Board7, European Commission

8, European Central Bank

9, World Economic Forum

10,

Ernst and Young11

and KPMG12

have set up general characteristics of FinTech concept.

"A picture is worth a thousand words." The term FinTech is the abbreviation of "financial

technology" and, depending on the context in which the term is used, may mean (1) new

innovative technology used in financial industry or related to financial industry or (2) financial

products/services developed on the basis of new innovative technology, direct or derived (and

more recently, may also refer to products/services not necessarily from the financial industry

developed on the basis of innovative technology) or (3) companies that create and/or develop new

innovative technologies and/or products/services based on these technologies.

It is very possible that some Readers would consider FinTech a phenomenon, while others will aim

to state of mind.

FinTech types

A simple example for a better understanding. A potential buyer assesses a property (land to grow

corn) using a (flying) drone. The drone technology in this context is PropTech, but it is not

FinTech (the single case when a PropTech becomes FinTech is when a financial institution uses

PropTech to provide a financial product/service). The potential buyer agrees to purchase the

property, but she/he needs further money in order to close the deal. Therefore, she/he turns to a

bank to borrow money (asking for a credit). The same drone is used by bank's staff in order to

6 http://www.imf.org/en/About/Key-Issues/Fintech, Fintech and Financial Services: Initial Considerations

7 Financial Stability Implications from FinTech - Supervisory and Regulatory Issues that Merit Authorities’ Attention

8 FinTech: A more competitive and innovative European financial sector

9 Hearing of the Committee on Economic and Monetary Affairs of the European Parliament

10 The_Future_of_FinTech_Paradigm_Shift_Small_Business_Finance_report_2015

11 EY FinTech adoption index – Germany

12 Will FinTechs replace traditional banks and insurance companies?

9/25

assess the property. The drone technology in this context is a FinTech, more precisely LendTech,

because this technology is used by a financial institution (bank) to collect data needed to the risk

assessment process of the lending money service. Let us assume that the bank agrees to lend

money (credit) and the borrower agrees to insure the crop(s) as part guarantee scheme of credit

instalments. After the purchase, a weather event damages the crop and the borrower (land owner)

asks the insurance company to assess the crop damage in order to collect the money. Let us assume

that insurance company staff will use the same drone to assess the crop damage. The drone

technology in this context is a FinTech, more precisely Insur(e)Tech, because this technology is

used by a financial institution (insurance company) to collect data needed for assessment process

in order to pay for the damage, but Insur(e)Tech can be used for selling insurances.

So, the same drone technology is used in financial sector by different types of financial

institutions, but also outside the financial sector.

Insur(e)Tech, InvestTech (consultancy, investment and asset management, including

WealthTech), LendTech (including crowdfunding), PayTech are the most relevant types of

FinTech. When it comes to financial authorities as central banks, financial regulators, financial

supervisors etc., all these authorities have their slice of FinTech, the SupTech. SupTech is

supervision technology used by financial authorities at least for collecting (financial) data13

in

order to supervise and regulate the financial sector.

13

"The Bank worked with the firm in its previous cohort to help identify anomalies in anonymised credit union

datasets. In this second phase, the Bank will build on those learnings to look at the versatility of the MindBridge Ai

Auditor™ tool to provide data visualisation and data preparation techniques for larger numeric and transaction-level

datasets. We are interested in the potential of machine learning to assist the way the Bank conducts plausibility and

validation checks on different types of datasets." (https://www.bankofengland.co.uk/research/fintech)

10/25

Section A: Expectations towards financial institutions and their associations

Access policies14

A 1. When providing15

a FinTech technology/product/service, a financial institution

would/should ensure that its FinTech technology/product/service is reachable by

potential FinTech users, namely consumers and firms.

A 2. When providing a FinTech technology/product/service, a financial institution

would/should ensure fostering access to financial services for consumers and firms

(financial inclusion).

A 3. When providing a FinTech technology/product/service, a financial institution

would/should ensure adequate scalability by its FinTech technology/product/service,

taking into account FinTech and innovation developments.

A 4. When providing a FinTech technology/product/service, a financial institution

would/should ensure adequate and complete control of its FinTech

technology/product/service, even when outsourcing or providing the FinTech

technology/product/service in cooperation with other entities.

Risk management

A 5. When providing a FinTech technology/product/service, a financial institution

would/should comply with relevant legal framework, including relevant competent

authorities' recommendations and warnings, taking into consideration different

jurisdictions.

A 6. When providing a FinTech technology/product/service, a financial institution

would/should aim to comply with relevant high standards and best practices.

A 7. A financial institution would/should closely monitor FinTech and (financial)

innovation developments and risks posed by these developments to its business, on

regular basis.

A 8. A financial institution would/should develop and promote a responsible financial

innovation culture.

A 9. A financial firm would/should define, identify and support responsible financial

innovation (which allows and promotes financial stability, financial inclusion, financial

education, adequate comprehensive and complex risk management, competition, etc.).

14

not necessary applicable to dedicated internal consumption of a financial institution 15

for easy reading of the paper the author used term "providing", but the reader should understand "developing,

acquiring or providing", simultaneously

11/25

A 10. A financial institution would/should include responsible FinTech and innovation in its

development strategy.

A 11. A financial institution would/should include FinTech and innovation vulnerabilities

and risks within its risk management framework.

A 12. A financial institution would/should review risk management framework concerning

FinTech developments (especially towards operational and cyber risks, including silent

cyber risk) on regular basis, in order to maintain a sound risk management framework,

even when outsourcing.

A 13. A financial institution would/should regularly review risk management framework

based on lessons learn from impact of FinTech and (financial) innovation

developments to own business and third parties.

A 14. When providing a FinTech technology/product/service, a financial institution

would/should allot appropriate resources.

A 15. A financial institution would/should regularly review its resources in order to ensure

that all resources remain available and fit to the complexity and evolution of risks

and vulnerabilities posed by its FinTech technology/product/service, including

without limiting to (1) experienced skilled managers and staff, (2) appropriate and

enforceable policies and procedures in diverse and extreme (but plausible) scenarios, (3)

assets and (4) appropriate and enforceable business continuity arrangements.

A 16. A financial institution would/should regularly review its knowledge base in order to

ensure it has always a deep knowledge of the FinTech technology/product/service.

A 17. When providing a FinTech technology/product/service, a financial institution

would/should assess FinTech impact on its risk appetite and to third parties, taking

into consideration possible inadequate risk assessment.

A 18. A financial institution's FinTech policy would/should promote financial stability and

decrease systemic risk and foster financial inclusion.

A 19. When providing a FinTech technology/product/service, a financial institution

would/should ensure both FinTech user interests protection (including FinTech

consumer long-term health/life safety) and environment protection.

A 20. When providing a FinTech technology/product/service, a financial institution

would/should ensure adequate balance between strong security and user

convenience (user-friendly environment), taking into account FinTech and innovation

developments.

12/25

A 21. When providing a FinTech technology/product/service, a financial institution

would/should ensure appropriate incident and financial crime detection and prompt

disclosure relevant authorities.

A 22. When providing a FinTech technology/product/service, a financial institution

would/should ensure always a high resilient level of its FinTech

technology/product/service, including adequate measures to protect locations,

development/testing/production environments and networks, websites, and

communications against abuse or attacks, taking into account (1) diverse and extreme

(but plausible) scenarios, (2) evolution of vulnerabilities and threats and (3) counter-

measures developments.

A 23. When providing a FinTech technology/product/service, a financial institution

would/should ensure regular and adequate testing of its FinTech

technology/product/service, taking into account (1) diverse and extreme (but plausible)

scenarios, (2) evolution of vulnerabilities and threats (3) counter-measures developments

and (4) FinTech and innovation developments.

A 24. When providing a FinTech technology/product/service, a financial institution

would/should ensure adequate efficiency and sustainability by its FinTech

technology/product/service, taking into account FinTech and innovation developments.

A 25. When providing a FinTech technology/product/service, a financial institution

would/should ensure its FinTech technology/product/service does not take advantage

of humans (e.g. induce human hardship or enslave them).

Interoperability

A 26. When providing a FinTech technology/product/service, a financial institution

would/should ensure adequate interoperability of its FinTech

technology/product/service (including formalised FinTech testing programs and

environments), taking into account FinTech and innovation developments.

Communication and Education

A 27. When providing a FinTech technology/product/service, a financial institution

would/should ensure regular proactive appropriate updated and fair FinTech user

information (awareness) and education, including FinTech technology/product/service

usage, major vulnerabilities, risks and treats posed by its FinTech

technology/product/service and name of its IT/cyber-security experienced auditor(s).

A 28. When providing a FinTech technology/product/service, a financial institution

would/should ensure prompt disclosure of incidents and financial crime related to its

FinTech technology/product/service to its FinTech users.

13/25

A 29. A financial institution would/should ensure that communication with FinTech user is

based on clear non-misleading easy readable formats in natural daylight

environment.

A 30. A financial institution would/should ensure at least one end-to-end secure

communication environment dedicated to FinTech user.

A 31. A financial institution would/should promote and support FinTech programs

dedicated to financial education.

A 32. A financial institution would/should disclose the meanings of relevant technological

concepts, by means of a glossary, but taking into consideration confidentiality and

intellectual property issues.

Cooperation

A 33. A financial institution would/should promote and support cooperation with both

private sector (financial industry actors, FinTech companies, technology groups/giants,

standardisation organisations - collaborative competition) and public sector (relevant

domestic, regional and international authorities) where possible.

A 34. A financial institution would/should publicly disclose compliance to all these

expectations, by means of self-assessment compliance report.

Section B: Expectations towards central banks and financial regulatory and supervision

authorities

B 1. Central banks and financial regulatory and supervision authorities16

should monitor

FinTech developments on regular basis.

B 2. Financial Authorities should regularly review that own resources remain fit to

identify, understand and properly manage technological risks posed to financial

institutions and financial system, in order to ensure financial stability.

B 3. Financial Authorities should debate on and enhance FinTech expectations.

B 4. Financial Authorities should enforce FinTech expectations by developing harmonised

FinTech legislation (RegTech) and/or standards, taking into consideration all

stakeholders and different jurisdictions.

B 5. Financial Authorities should ensure appropriate balance between FinTech legislation

(RegTech) and/or standards and long-term financial markets innovation.

16

Financial Authorities

14/25

B 6. Financial Authorities should support FinTech technology/product/service that

promotes (world wide/regional) financial inclusion.

B 7. Financial Authorities should assess and promote accessible (pre-regulatory)

sandboxes for all types of FinTech developers from their jurisdictions.

B 8. Financial Authorities should promote adequate scalability of FinTech

technology/product/service.

B 9. Financial Authorities should promote innovative, interoperable and competitive

FinTech technologies/products/services across different jurisdictions and regions.

Cooperation

B 10. Financial Authorities should promote cooperation with both private sector (financial

industry actors, FinTech companies, technology firms/groups, standardisation

organisations - collaborative competition) and public sector (other relevant domestic,

regional and international financial authorities - known as FinTech bridges - and

consumer protection, data protection, competition and national security authorities)

where possible.

Education

B 11. Financial Authorities should support comprehensive FinTech educational programs.

Section C: Expectations towards international organisations and other authorities than

central banks and financial supervision authorities

C 1. International organisations and other authorities than central banks and financial

supervision authorities17

should monitor FinTech developments on regular basis.

C 2. Authorities should regularly review that own resources remain fit to identify and

understand technological risks posed in digital age.

C 3. Authorities should debate on and enhance FinTech expectations.

C 4. Authorities should support enforce FinTech expectations by developing worldwide

harmonised FinTech legislation (RegTech) and/or standards, taking into consideration

all stakeholders and different jurisdictions.

C 5. Authorities should ensure appropriate balance between FinTech legislation

(RegTech) and/or standards and long-term financial markets innovation.

17

Authorities

15/25

C 6. Authorities should support FinTech technology/product/service that promotes (world

wide/regional) financial inclusion.

C 7. Authorities should promote adequate scalability of FinTech

technology/product/service.

C 8. Authorities should promote innovative, interoperable and competitive FinTech

technologies/products/services across different jurisdictions and regions.

Cooperation

C 9. Authorities should promote cooperation with both private sector (financial industry

actors, FinTech companies, technology firms/groups, standardisation organisations -

collaborative competition) and public sector (other relevant domestic, regional and

international authorities - FinTech bridges) where possible.

Education

C 10. Authorities should elaborate and promote comprehensive FinTech educational

programs.

16/25

Annex

Case #1

Robot intelligence is dangerous: Expert's warning after Facebook AI 'develop their own

language' It happened while the social media firm was experimenting with teaching the ‘chatbots’

how to negotiate with one another. During tests, they discovered the bots - known as Alice and

Bob -managed to develop their own machine language spontaneously.

(https://www.mirror.co.uk/tech/robot-intelligence-dangerous-experts-warning-10908711)

Case #2

Nigerian Oshi Agabi has unveiled a computer based not on silicon but on mice neurons at the

TEDGlobal conference in Tanzania. The system has been trained to recognise the smell of

explosives and could be used to replace traditional airport security, he said.

Eventually the modem-sized device - dubbed Koniku Kore - could provide the brain for future

robots. All of the big tech firms, from Google to Microsoft, are rushing to create artificial

intelligence modelled on the human brain.

(http://www.bbc.com/news/technology-40935771)

Case #3

Hacking a computer using DNA is now a reality. Researchers from the University of Washington

say they have successfully hacked into a computer using custom strands of DNA for the first

time. Akin to something from the pages of science fiction, the researchers used the life-encoding

molecule to attack and take over a computer, using strands of DNA to transmit a computer virus

from the biological to the digital realm.

(https://www.theguardian.com/technology/2017/aug/11/hacking-computer-dna-university-of-

washington-lab)

Case #4

Google's quantum computer could change the world. The ultra-powerful machine has the

potential to disrupt everything from science and medicine to national security - assuming it

works.

(http://www.business-standard.com/article/technology/how-google-s-quantum-computer-could-

change-the-world-117101900663_1.html)

Case #5

Quantum Computing is Threat To Bitcoin And Blockchain. One cryptographer thought breaking a

digital signature would require "government level" spending, adding that the first breakage would

likely be a stunt pulled off on a $50 million machine. “Maybe it will take months, maybe it will

take minutes, but it will be a very expensive operation to break one signature," he said. "Once they

break one then we’ll start talking how long it will be for a criminal to do it for essentially a

dollar.”

17/25

(https://www.forbes.com/sites/amycastor/2017/08/25/why-quantum-computings-threat-to-bitcoin-

and-blockchain-is-a-long-way-off/2/#62fef82e29a9)

Case #6

IBM launched IBM Q, a quantum computer research a program in cooperation with JPMorgan

Chase, Daimler AG, Samsung, JSR Corporation Barclays, Hitachi Metals, Honda Oxford

University and University of Melbourne.

(https://www.research.ibm.com/ibm-q/network/#/partners )

Case #7

EnvisionIP has arrived to the conclusion that Bank of America Corp. has more blockchain

patents (43) than any other US firm does.

(http://patentvue.com/2018/01/12/blockchain-patent-filings-dominated-by-financial-services-

industry/)

Case #8

The FinTech Times publishes in January 2018 edition that Mastercard unveiled an

augmented reality shopping experience that for the first time incorporates Masterpass and

Identity Check Mobile with iris authentication for safe and seamless payments and

Mastercard KAI. comunication AI envinroment.

(The FinTech Times, January 2018 edition, Mastercard to unveil new AR experience and KAI

chatbot and https://thefintechtimes.com/wp-content/uploads/2017/12/16-2017_The-Fintech-

Times_December.pdf)

Case #9

According to World Economic Forum report 10 jobs that didn’t exist 10 years ago, eight of these

ten new jobs are in technology sector or technology related sector: app developer, social media

manager, Uber driver, driverless car engineer, cloud computing specialist, big data analyst/data

scientist, sustainability manager, YouTube content creators, drone operators and millennial

generational expert.

(https://www.weforum.org/agenda/2016/06/10-jobs-that-didn-t-exist-10-years-ago/)

Case #10

According to World Economic Forum report The Future of Jobs, 65% of children entering

primary school today will ultimately end up working in completely new job types that don’t

yet exist.

(http://reports.weforum.org/future-of-jobs-2016/chapter-1-the-future-of-jobs-and-skills/)

Case #11

18/25

DTCC has set "Three priorities in Making DLT a Reality"

(http://www.dtcc.com/news/2017/july/17/three-priorities-in-making-dlt-a-reality)

Case #12

Riksbank, the Central Bank of Sweden, disclose its project to issue digital central bank

currency, e-krona and now Riksbank is assessing technical issues of the private tenders, while

FED, Bank of Canada, European Central Bank and Bank of Japan are not convinced by

blockchain-DLT technology, after looking into possible blockchain applications in payments.

(https://www.riksbank.se/globalassets/media/tal/svenska/skingsley/2016/tal_skingsley_161116_en

g.pdf?_t_id=1B2M2Y8AsgTpgAmY7PhCfg%3d%3d&_t_q=e-krona&_t_tags=language%3aen-

GB%2csiteid%3af3366ed3-598f-4166-aa5a-

45d5751e940b&_t_ip=188.27.89.176&_t_hit.id=Riksbanken_Core_Models_Media_DocumentFile

/_de930045-62b2-4f02-b8a9-f26486ad9372&_t_hit.pos=4,

https://www.riksbank.se/globalassets/media/rapporter/e-krona/2018/lista-over-

teknikforetag_180124_eng.pdf?_t_id=1B2M2Y8AsgTpgAmY7PhCfg%3d%3d&_t_q=e-

krona&_t_tags=language%3aen-GB%2csiteid%3af3366ed3-598f-4166-aa5a-

45d5751e940b&_t_ip=82.79.232.155&_t_hit.id=Riksbanken_Core_Models_Media_DocumentFile

/_a084877b-f0f0-4b2e-843c-97ec4f827f04&_t_hit.pos=2 and

https://www.reuters.com/article/us-blockchain-ecb/blockchain-immature-for-big-central-banks-

ecb-and-boj-say-idUSKCN1BH2DH)

Case #13

Bank for International Settlements issue 10 recommedations with regard to implications of fintech

developments among them "Banks and bank supervisors should consider how they balance

ensuring the safety and soundness of the banking system with minimising the risk of

inadvertently inhibiting beneficial innovation in the financial sector." and "Bank supervisors

should assess their current staffing and training models to ensure that the knowledge, skills and

tools of their staff remain relevant and effective in supervising new technologies and

innovative business models. Supervisors should also consider whether additional specialised

skills are needed to complement existing expertise."

(https://www.bis.org/bcbs/publ/d415.pdf)

Case #14

European Commission launches the EU Blockchain Observatory and Forum.

EU rules for the fast-evolving field of robotics, to settle issues such as compliance with ethical

standards and liability for accidents involving driverless cars, should be put forward by the EU

Commission, urged the Legal Affairs Committee.

MEPs ask the EU Commission to propose rules on robotics and artificial intelligence, in order to

fully exploit their economic potential and to guarantee a standard level of safety and security.

19/25

(http://europa.eu/rapid/press-release_IP-18-

521_en.htm?lipi=urn%3Ali%3Apage%3Ad_flagship3_feed%3BSdhxuIHnSoinHHhxlyFI9g%3D

%3D,

http://www.europarl.europa.eu/news/en/press-room/20170110IPR57613/robots-legal-affairs-

committee-calls-for-eu-wide-rules and

http://www.europarl.europa.eu/news/en/press-room/20170210IPR61808/robots-and-artificial-

intelligence-meps-call-for-eu-wide-liability-rules)

20/25

References

1. Bank for International Settlements (BIS):

Digital currencies, https://www.bis.org/cpmi/publ/d137.htm

Money in the digital age: what role for central banks?,

https://www.bis.org/speeches/sp180206.htm

Distributed ledger technology in payment, clearing and settlement,

https://www.bis.org/cpmi/publ/d157.htm

Sound Practices: implications of fintech developments for banks and bank supervisors,

https://www.bis.org/bcbs/publ/d431.htm

Mojmír Hampl: Central banks, digital currencies and monetary policy in times of elastic

money, https://www.bis.org/review/r170720b.htm

Lars Rohde: Financial sector developments, digital currency and risky ties in Denmark,

https://www.bis.org/review/r180110e.htm

2. Bank of Cananda:

Fintech and the Financial Ecosystem: Evolution or Revolution?,

https://www.bankofcanada.ca/2016/06/fintech-financial-ecosystem-evolution-revolution/

Project Jasper: Are Distributed Wholesale Payment Systems Feasible Yet?,

https://www.bankofcanada.ca/wp-content/uploads/2017/05/fsr-june-2017-chapman.pdf

3. Bank of England:

Innovations in payment technologies and the emergence of digital currencies,

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/innovations-

in-payment-technologies-and-the-emergence-of-digital-

currencies.pdf?la=en&hash=AB46869B3EF355A0486F7B0BAF086F2EEE31554D

The economics of digital currencies,

https://www.bankofengland.co.uk/-/media/boe/files/digital-currencies/the-economics-of-

digital-

currencies.pdf?la=en&hash=BE28BE59F18E79CCE705643CF14F36DF8897E56D

We're challenging you to think about a cyber security,

http://tech.bankofenglandearlycareers.co.uk/

Peer-to-peer lending and financial innovation in the United Kingdom,

https://www.bankofengland.co.uk/working-paper/2016/peer-to-peer-lending-and-

financial-innovation-in-the-uk

The macroeconomics of central bank issued digital currencies,

https://www.bankofengland.co.uk/working-paper/2016/the-macroeconomics-of-central-

bank-issued-digital-currencies

A new RTGS service for the United Kingdom: safeguarding stability, enabling innovation,

https://www.bankofengland.co.uk/news/2016/september/a-new-rtgs-service-for-the-uk-

safeguarding-stability-enabling-innovation

The Promise of FinTech – Something New Under the Sun,

https://www.bankofengland.co.uk/speech/2017/the-promise-of-fintech-something-new-

under-the-sun

The macroeconomics of central bank issued digital currencies,

21/25

https://www.bankofengland.co.uk/working-paper/2016/the-macroeconomics-of-central-

bank-issued-digital-currencies

Running blockchain and AI trials,

https://www.telegraph.co.uk/business/2017/03/17/bank-england-trials-artificial-

intelligence-blockchain-bid-stay/

4. Bank of Finland: Digitalisation – old game, new rules or an entirely new game?,

https://www.suomenpankki.fi/sv/medier-och-publkationer/tal-och-

intervjuer/2016/governor-erkki-liikanen-digitalisation-old-game-new-rules-or-an-

entirely-new-game-payments-forum-helsinki-10-may-2016/

5. Bank of Japan: Project Stella,

https://www.boj.or.jp/en/announcements/release_2017/rel170906a.htm/

6. Banque de France:

Financial Stability in the Digital Era,

https://bravenewcoin.com/assets/Industry-Reports-2016/Banque-de-France-Financial-

Stability-In-The-Digital-Age-English.pdf,

Financial Stability in the Age of Digital Industry,

https://www.bis.org/review/r160426e.pdf

Labo Blockchain,

https://blockchainfrance.net/banque-de-france-blockchain/

7. BNY Mellon: Innovation in Payments: The Future is Fintech,

https://www.bnymellon.com/us/en/our-thinking/innovation-in-payments-the-future-is-

fintech.jsp

8. Central Bank of Malaysia: Future banking: reimagining banks – driving transformation and

innovation,

https://www.bis.org/review/r160527b.htm

9. Crane Andrew; Eaton Margaret, Hanekamp Gerd, Matten Dirk, Moon Jeremy and

more, Business Ethics for innovation

10. Deutsche Bundesbank: Carl-Ludwig Thiele: From Bitcoin to digital central bank money -

still a long way to go,

https://www.bis.org/review/r170921d.htm

11. European Banking Authority (EBA):

Opinion on ‘virtual currencies’,

https://www.eba.europa.eu/documents/10180/657547/EBA-Op-2014-

08+Opinion+on+Virtual+Currencies.pdf

Draft recommendations on outsourcing to cloud service providers,

https://www.eba.europa.eu/regulation-and-policy/internal-governance/recommendations-

on-outsourcing-to-cloud-service-providers

EBA response to the EC Consultation Document on Fintech: a more competitive and

innovative European Financial Sector,

https://www.eba.europa.eu/-/eba-responds-to-the-european-commission-public-

consultation-on-fintech

Final guidelines on the security of internet payments,

https://www.eba.europa.eu/regulation-and-policy/consumer-protection-and-financial-

innovation/guidelines-on-the-security-of-internet-payments

12. European Central Bank:

Distributed Ledger Technology,

22/25

https://www.ecb.europa.eu/pub/annual/special-features/2016/html/index.en.html

Shaping the future of Europe’s financial market infrastructure,

https://www.ecb.europa.eu/press/key/date/2016/html/sp160322.en.html

Terms Of Reference Task Force on Distributed Ledger Technologies,

https://www.ecb.europa.eu/paym/initiatives/shared/docs/dlt_task_force_mandate.pdf

Distributed ledger technologies in securities post-trading,

https://www.ecb.europa.eu/pub/pdf/scpops/ecbop172.en.pdf

Digital na(t)ive? Fintechs and the future of banking,

https://www.ecb.europa.eu/press/key/date/2017/html/sp170327_1.en.html

Eurosystem expectations for clearing infrastructures to support pan European instant

payments in euro,

https://www.ecb.europa.eu/paym/retpaym/shared/pdf/Eurosystem_expectations_for_insta

nt_clearing_infrastructures.pdf?b3a1ca29c46f12ee610d4c4f24ee42ac

Virtual or virtueless? The evolution of money in the digital age,

https://www.bis.org/review/r180208e.htm

Digital Base Money - an assessment from the European Central Bank's perspective,

https://www.bis.org/review/r170117b.htm

13. European Commission: FINTECH: A more competitive and innovative European financial

sector,

https://ec.europa.eu/info/finance-consultations-2017-fintech_en

14. European Parliament: FinTech: the influence of technology on the future of the financial

sector,

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A8-

2017-0176+0+DOC+XML+V0//EN

15. European Securities and Markets Authority, European Banking Authority and

European Insurance amd Occupational Pesnions Authority:

Use of Big Data by Financial Institutions,

https://www.esma.europa.eu/press-news/esma-news/european-supervisory-authorities-

consult-big-data

Automation in financial advice,

https://esas-joint-

committee.europa.eu/Publications/Discussion%20Paper/20151204_JC_2015_080_discus

sion_paper_on_Automation_in_Financial_Advice.pdf

16. European Securities and Markets Authority (ESMA):

Investment using virtual currency or distributed ledger technology,

https://www.esma.europa.eu/document/investment-using-virtual-currency-or-distributed-

ledger-technology

Financial Innovation: towards a balanced regulatory response,

https://www.esma.europa.eu/sites/default/files/library/2016-

345_financial_innovation_towards_a_balanced_regulatory_response_-

_speech_by_v._ross_0.pdf

The Distributed Ledger Technology Applied to Securities Markets,

https://www.esma.europa.eu/sites/default/files/library/dlt_report_-_esma50-1121423017-

285.pdf

The Adoption of RegTech within the Financial Services Industry: Ten years from the Start

of the ‘Great Financial Crisis’,

23/25

https://www.esma.europa.eu/sites/default/files/library/pka_speech_regtech.pdf

ESMA response to the Commission Consultation Paper on Fintech: A more competitive

and innovative financial sector,

https://www.esma.europa.eu/sites/default/files/library/esma50-158-

457_response_to_the_ec_consultation_on_fintech.pdf

17. Ferderal Reserve (FED):

Bitcoin: A primer,

https://www.chicagofed.org/publications/chicago-fed-letter/2013/december-317

Distributed ledger technology in payments, clearing, and settlement,

https://www.federalreserve.gov/econresdata/feds/2016/files/2016095pap.pdf

The use of distributed ledger technologies in payment, clearing, and settlement,

https://www.federalreserve.gov/newsevents/speech/brainard20160414a.htm

Innovation, technology, and the payments system,

https://www.federalreserve.gov/newsevents/speech/powell20170303a.htm

Faster Payments Effectiveness Criteria,

https://fedpaymentsimprovement.org/wp-content/uploads/fptf-payment-criteria.pdf

Where Do Banks Fit in the Fintech Stack?,

https://www.federalreserve.gov/newsevents/speech/brainard20170428a.htm

18. Financial Conduct Authority (UK):

Innovate and Innovation Hub,

https://www.fca.org.uk/firms/innovate-innovation-hub

TechSprint,

https://www.fca.org.uk/firms/regtech/techsprints,

https://www.fca.org.uk/events/techsprints/financial-services-and-mental-health-

techsprint,

https://www.fca.org.uk/events/techsprints/model-driven-machine-executable-regulatory-

reporting-techsprint and

https://www.fca.org.uk/news/press-releases/fca-launches-call-input-use-technology-

achieve-smarter-regulatory-reporting

19. Financial Stability Board:

FinTech Credit: Market Structure, Business Models and Financial Stability Implications,

http://www.fsb.org/wp-content/uploads/CGFS-FSB-Report-on-FinTech-Credit.pdf

Financial Stability Implications from FinTech,

http://www.fsb.org/wp-content/uploads/R270617.pdf

20. Financial Services Commission (Gibraltar): Distributed Ledger Technology Regulatory

Framework,

http://www.fsc.gi/dlt?print

21. International Monetary Fund (IMF):

Virtual Currencies and Beyond: Initial Considerations,

https://www.imf.org/external/pubs/ft/sdn/2016/sdn1603.pdf

Fintech and Financial Services: Initial Considerations,

https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2017/06/16/Fintech-

and-Financial-Services-Initial-Considerations-44985

22. Government (Australia): Backing Australian FinTech,

http://fintech.treasury.gov.au/

23. Government (Japan):

24/25

Japanese Government Unveils Evaluation Process for Blockchain Platforms,

https://www.ccn.com/japan-evaluation-blockchain-platforms/

Evaluation Forms for Blockchain Based System,

http://www.meti.go.jp/english/press/2017/pdf/0329_004a.pdf

Keychain demos blockchain IoT to Japanese government,

https://www.blockchaintechnews.com/news/keychain-demos-blockchain-iot-to-japanese-

government/

24. Government (UK): Distributed Ledger Technology: beyond blockchain,

https://www.gov.uk/government/news/distributed-ledger-technology-beyond-block-

chain

25. Gur Huberman, Jacob D. Leshno, Ciamac Moallemi: Monopoly Without a Monopolist: An

Economic Analysis of the Bitcoin Payment System,

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3025604##

26. International Organisation of Securities Commissions (IOSCO): Securities Markets Risk

Outlook,

https://www.iosco.org/library/pubdocs/pdf/IOSCOPD453.pdf

27. Monetary Authority of Singapore: Singapore's FinTech journeys,

http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-

Statements/Speeches/2016/Singapore-FinTech-Journey.aspx and

http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-

Statements/Speeches/2017/Singapore-FinTech-Journey-2.aspx

28. Norges Bank: What should the future form of our money be?,

https://www.norges-bank.no/en/Published/Speeches/2017/2017-04-25-dnva/

29. Office of the Comptroller of the Currency (OCC):

Exploring Special Purpose National Bank Charters for Fintech Companies,

https://www.occ.gov/topics/responsible-innovation/comments/special-purpose-national-

bank-charters-for-fintech.pdf (Dec 2016),

OCC Summary of Comments and Explanatory Statement: Special Purpose National Bank

Charters for Financial Technology Companies,

https://www.occ.gov/topics/responsible-innovation/summary-explanatory-statement-

fintech-charters.pdf

Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective,

https://www.occ.gov/publications/publications-by-type/other-publications-reports/pub-

responsible-innovation-banking-system-occ-perspective.pdf

30. Reserve Bank of India:

Report of the Working Group on FinTech and Digital Banking,

https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=892

FinTechs and virtual currency,

https://www.rbi.org.in/scripts/BS_SpeechesView.aspx?Id=1036

31. Reserve Bank of Australia: RBA looking closely at digital currency,

http://www.afr.com/technology/rba-looking-closely-at-digital-currency-20171027-gz9efh

32. Riksbank: e-krona project,

https://www.riksbank.se/en-gb/financial-stability/the-financial-system/payments/does-

sweden-need-an-e-krona/the-e-krona-projects-first-interim-report/

33. White House: Executive Order, Coordinating Efforts to Prepare the Nation for Space

Weather Events,

25/25

https://obamawhitehouse.archives.gov/the-press-office/2016/10/13/executive-order-

coordinating-efforts-prepare-nation-space-weather-events

34. World Economic Forum:

The Future of FinTech A Paradigm Shift in Small Business Finance,

https://www.weforum.org/reports/future-fintech-paradigm-shift-small-business-finance

The Future of Jobs,

http://reports.weforum.org/future-of-jobs-2016/

10 jobs that didn’t exist 10 years ago,

https://www.weforum.org/agenda/2016/06/10-jobs-that-didn-t-exist-10-years-ago/

The Global Risks Reports (edition 2015, 2016, 2017, 2018)

35. Melanie Swan: Blockchain Blueprint For A New Economy,

http://w2.blockchain-tec.net/blockchain/blockchain-by-melanie-swan.pdf

36. Mihai Voicu: We do FinTech