Financial Technologies and Financial Regulation

34 Pages Posted: 18 May 2022

See all articles by Chusu He

Chusu He

University of Bath - School of Management

David T. Llewellyn

Loughborough University - Department of Economics

Alistair Milne

Loughborough University - School of Business and Economics

Date Written: May 12, 2022

Abstract

This paper analyses the challenges for financial regulation posed by new financial technologies. It provides a conceptual framework incorporating both new financial products and services and new institutional arrangements including decentralised finance without intermediaries. Four possible responses are identified: enhancing or adapting existing regulation, developing new regulation, reducing barriers to entry and exit and monitoring and regulating the ‘permissionless’/’permissioned’ boundary. Competitive efficiency emerges as a third financial regulation objective alongside established conduct of business and prudential objectives. Trade-offs between these objectives can be improved through market level regulation of processes and data standards, alongside existing functional and institutional regulation.

Keywords: cryptocurrencies, DeFi, financial technologies, FinTech, institutional regulation, functional regulation, competitive efficiency, conduct of business, prudential risks

JEL Classification: G10, G18, G20, G28, L51

Suggested Citation

He, Chusu and Llewellyn, David T. and Milne, Alistair K. L., Financial Technologies and Financial Regulation (May 12, 2022). European Banking Institute Working Paper Series 2022 - no. 123, Available at SSRN: https://ssrn.com/abstract=4112406 or http://dx.doi.org/10.2139/ssrn.4112406

Chusu He (Contact Author)

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

David T. Llewellyn

Loughborough University - Department of Economics ( email )

York House
Loughborough LE11 3TU
Great Britain

Alistair K. L. Milne

Loughborough University - School of Business and Economics ( email )

Epinal Way
Loughborough
Leicestershire, LE11 3TU
United Kingdom

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