The Consumer Financial Protection Bureau, working in collaboration with 11 international financial regulators and related organizations, has announced an initiative to create the Global Financial Innovation Network (GFIN).
The network “will seek to provide a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas,” the Bureau said in an announcement. It will also create “a new framework for cooperation between financial services regulators on innovation-related topics.”
The collaborative effort is organized around a draft consulting document.
The consulting document sets out the three main proposed functions of the GFIN:
Act as a network of regulators to collaborate and share experience of innovation in respective markets, including emerging technologies and business models;
Provide a forum for joint policy work and discussions; and
Provide firms with an environment in which to trial cross-border solutions.
“The major emerging innovation trends within financial services are increasingly global, rather than domestic, in nature,” the executive summary says. “For instance, big data, artificial intelligence and blockchain based solutions are being developed and deployed simultaneously in different financial markets. Since there is a general trend towards developing these digital solutions, now is a time to consider how to begin building new ways to share experience and manage the questions that emerge.”
“Financial services regulators must re-consider existing ways of working and collaborating, in order to balance potential benefits of innovation (for consumers and the financial sector as a whole) with traditional policy objectives, namely financial stability, integrity, financial inclusion, competition and consumer wellbeing and protection,” it adds.
The BCFP and the other regulators are seeking public comment on the mission statement for the GFIN, its proposed functions, and where it should prioritize activity. In the United States, interested parties can provide feedback to the Bureau’s Office of Innovation.
The announcement follows an initial whitepaper on the idea of a 'global sandbox' led by the United Kingdom’s Financial Conduct Authority in February 2018. Key themes to emerge in the feedback were:
Regulatory cooperation: Respondents were supportive of the idea of the initiative providing a setting for regulators to collaborate on common challenges or policy questions firms face in different jurisdictions.
Speed to market: Respondents cited one of the main advantages for the global sandbox could be reducing the time it takes to bring ideas to new international markets.
Governance: Feedback highlighted the importance of the project being transparent and fair to those potential firms wishing to apply for cross-border testing.
Emerging technologies/business models: A wide range of topics and subject matters were highlighted in the feedback, particularly those with notable cross-border application. Among issues highlighted were artificial intelligence, distributed ledger technology, data protection, regulation of securities and Initial Coin Offerings, know your customer, and anti-money laundering.
The working group is asking for feedback on questions contained in the Consultation Document by Oct. 14, 2018. Over the course of the next two months, the group will engage with interested parties across different jurisdictions. In the fall, the working group will assess feedback and agree on next steps.
In the United States, interested stakeholders can share written and/or other feedback directly to the Bureau’s Office of Innovation at firstname.lastname@example.org. Comments can also be shared with the FCA and other regulators, with contact information available within the Consultation Document.
In addition to the BCFP and the FCA, the organizations currently involved in the GFIN are: Abu Dhabi Global Markets; Autorité des marchés financiers (Québec); Australian Securities & Investments Commission; Central Bank of Bahrain; Dubai Financial Services Authority; Guernsey Financial Services Commission; Hong Kong Monetary Authority; Monetary Authority of Singapore; Ontario Securities Commission; and Consultative Group to Assist the Poor (CGAP).