Centre of FinTech's work on crypto regulation published

The University's Centre of FinTech has had its response to the Financial Stability Board's (FSB) Proposed Framework for International Regulation of crypto-asset Activities published on its website.

The Centre argued for globally agreed standards on crypto assets to protect investors, ensure financial stability, and guard against crime.

The FSB promotes international financial stability by coordinating national financial authorities and international standard-setting bodies as they work toward developing strong regulatory, supervisory and other financial sector policies.

In October 2022, the FSB published a proposed framework for the international regulation of crypto-asset activities. Dr Iwa Salami, co-director for UEL's Centre of FinTech, submitted recommendations which have now been published on the FSB's website.

Dr Iwa Salami said, “This shows how research conducted at the Centre of FinTech is contributing to international policy - in this case, the international regulation of crypto-assets.

“The Centre of FinTech welcomes the FSB's ongoing efforts to further enhance market stability and market integrity by addressing the regulatory, supervisory and oversight related challenges of crypto assets. We acknowledge FSB's valuable work in this space aimed at building a truly robust framework for crypto-assets regulation. At the Centre of FinTech, we believe that strong regulation is needed to facilitate all dimensions of FinTech – a significant aspect being crypto assets, which covers the remit of our current work.

“We believe that globally agreed standards on market integrity, investor protection, to achieve financial stability and safeguards against cybersecurity threats and financial crime (such as money laundering and terrorism financing) are essential.”

The Centre of FinTech believes that a broad-brush approach to regulation would not be sufficient in achieving a robust framework. The framework needs to take account of the differences between this asset class and assets from traditional finance which requires a difference of approach to regulation. A unique feature is the cross-border dimensions of crypto assets which any robust regulatory regime would need to cater for and without which regulation would be inadequate.

Between September 2019 and June 2021, the crypto-asset ecosystem expanded by 2,300 per cent, and according to estimates of ownership of these assets published by the UNCTAD (United Nations Conference on Trade and Development) in 2021, 75 per cent of the top 20 crypto economies were emerging market and developing economies.

Dr Salami added, “We also know that most of those countries lack the skill and infrastructure to adequately regulate the space – such as the infrastructure for approving licenses for those crypto-asset firms wishing to operate in their jurisdictions. Any weak regulation from such jurisdictions is likely to lead to regulatory arbitrage and loopholes in the framework that may then jeopardise the strength of the regulation of the space.

“We believe that a robust global approach to regulation would be significant for the continued operation of both decentralised and centralised exchanges and platforms.”

In 2022, the University launched the Centre of FinTech, which cuts across a number of disciplines and leverages the expertise within the University in research, finance, technology, law and regulation.

The Centre of FinTech aims to be a hub for informing public policy on FinTech Regulation and is keen to continue to provide practical regulatory support to countries and the FinTech industry, globally, in order to achieve a robust regulatory framework for the industry.

The FSB expects to publish its final reports in July 2023.