AFI Innovative Regulatory Approaches Toolkit

46 Pages Posted: 19 Apr 2021

See all articles by Douglas W. Arner

Douglas W. Arner

The University of Hong Kong - Faculty of Law

Ross P. Buckley

University of New South Wales (UNSW) - Faculty of Law

Dirk A. Zetzsche

Universite du Luxembourg - Faculty of Law, Economics and Finance; Heinrich Heine University Dusseldorf - Center for Business & Corporate Law (CBC); European Banking Institute

Eriks Selga

The University of Hong Kong, Faculty of Law, Students

Ghiyazuddin Mohammad

Jaheed Parvez

Independent

Roberta Consiglio

University of Luxembourg, ADA Chair in Financial Law (inclusive finance)

Date Written: April 2021

Abstract

Countries and economies around the world are seeking ways to foster their digital finance and financial technology (‘FinTech’) ecosystems to better support financial inclusion and sustainable development. At the core of such efforts are supporting the development of new products and services, bringing more competition and consumer choice into their financial systems and increasing savings and investment to support both individual and community development. At the same time, the potential of innovation must also be balanced against potential risks, in particular financial stability, consumer protection and market integrity concerns.

In order to support these objectives, regulators are developing new regulatory approaches, including innovation hubs and regulatory sandboxes (which we collectively term, ‘innovation facilities’) as well as new policy frameworks and the use of technology for regulatory and supervisory purposes (‘RegTech’ and ‘SupTech’). Innovation facilities are created to offer direct and indirect support to novel digital finance and fintech initiatives in a controlled environment. They are underpinned by foundational infrastructure, including mobile and other communications systems especially internet access, digital identification systems (in particular sovereign systems), frameworks to encourage simplified and widespread opening of financial and mobile money accounts, and interoperable electronic payment systems. All of the above enable a range of e-government services as well as an environment for wider commercial development, supporting financial inclusion and progress towards the UN Sustainable Development Goals (AFI 2018).

Such foundational infrastructure works best in the context of appropriate balanced and proportional regulatory approaches to innovation, digital finance and FinTech. This includes the general efficiency of the legal system, human capital development, support for research and development, access to information, and availability of financing. More narrowly, it also depends on the use of technology by regulators and supervisorsthemselves (RegTech and SupTech) in order to better achieve regulatory objectives, enhance competition and efficiency (AFI 2020a).

This Toolkit provides a structured approach to the implementation considerations of innovative regulatory approaches including innovation facilities for authorities with jurisdiction over financial products and services (which we term ‘Regulators’). It aggregates a variety of resources and case studies to provide guidance for Regulators seeking to answer the following questions:

1. What are innovation facilities?
2. What are the pre-requisites for effective innovation facilities?
3. When should Regulators consider implementing an innovation facility?
4. How to implement an innovation hub?
5. How to implement a regulatory sandbox?
6. How to steer efforts towards regional cooperation in innovation facilities?

This Toolkit aims to complement existing guidance on innovative facilities by the Alliance for Financial Inclusion and other stakeholders through providing additional practical evaluation tools. In using this Toolkit, regulators from the AFI network and beyond are invited to employ the attached workbook, which provides self-assessments and exercises to help guide their decision-making process.

Keywords: FinTech, RegTech, financial inclusion, UN Sustainable Development Goals, regulatory sandbox, innovation hub

Suggested Citation

Arner, Douglas W. and Buckley, Ross P. and Zetzsche, Dirk Andreas and Selga, Eriks and Mohammad, Ghiyazuddin and Parvez, Jaheed and Consiglio, Roberta, AFI Innovative Regulatory Approaches Toolkit (April 2021). University of Hong Kong Faculty of Law Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3827568 or http://dx.doi.org/10.2139/ssrn.3827568

Douglas W. Arner (Contact Author)

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

HOME PAGE: http://hub.hku.hk/rp/rp01237

Ross P. Buckley

University of New South Wales (UNSW) - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia

Dirk Andreas Zetzsche

Universite du Luxembourg - Faculty of Law, Economics and Finance ( email )

Luxembourg, L-1511
Luxembourg

HOME PAGE: http://wwwen.uni.lu/recherche/fdef/research_unit_in_law/equipe/dirk_andreas_zetzsche

Heinrich Heine University Dusseldorf - Center for Business & Corporate Law (CBC) ( email )

Universitaetsstr. 1
D-40225 Düsseldorf
Germany
+49 211 81 15084 (Phone)
+49 211 81 11427 (Fax)

European Banking Institute ( email )

Frankfurt
Germany

Eriks Selga

The University of Hong Kong, Faculty of Law, Students ( email )

Pokfulam Road
Hong Kong
Hong Kong

Jaheed Parvez

Independent ( email )

Roberta Consiglio

University of Luxembourg, ADA Chair in Financial Law (inclusive finance) ( email )

4, rue Alphonse Weicker L-2721 Luxembourg
Luxembourg, L-1511
Luxembourg

No contact information is available for Ghiyazuddin Mohammad

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