Fintech and Financial Stability Regulation Status Quo

Abstract

This chapter explores the inadequacies of our current financial regulatory system when it comes to fintech. It starts by describing the challenges that technological innovation poses for regulation generally, then looks more specifically at the difficulties inherent in regulating fintech. Some financial regulators have been experimenting with new regulatory approaches (like innovation hubs and regulatory sandboxes) in light of fintech’s ascendance, but most of the experimentation so far has focused on supporting private sector innovation, rather than mitigating the negative consequences of that innovation for financial stability. Because the industry’s adoption of fintech innovations (and regtech innovations) poses some challenges for financial stability regulation, Chapter 5 also considers the role that technological innovations by the regulatory agencies themselves (known as “suptech”) can play in addressing those challenges.