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DFSWG INNOVATIVE REGULATORY APPROACHES TOOLKIT
FIGURE 4: PRINCIPLES OF SMART REGULATION
ACTIVITY-BASED REGULATION Regulation should reflect the activities and functions performed instead of the type of organization performing them.
GLOBAL FUNDAMENTALS Regulation should be constructed on and remain consistent with shared international standards, especially in the areas of financial stability, transparency and efficiency, and market integrity / AML/CFT. Regulator’s mandates may need to be broadened to encompass the promotion of market development and financial inclusion including innovation and competition to allow regulatory flexibility.
TECHNOLOGY-NEUTRAL REGULATION Regulation should be focused on the activity and processes enabled by technology, instead of the technological innovations themselves. It is rarely a good idea to seek to regulate technologies as such.
GRADUATED PROPORTIONAL REGULATION Regulation should be proportional to the size of the subject entity and the risks generated, graduated into tiers reflecting differences in risks, and take into account capacity disparities between small FinTech start-ups, major financial institutions and large technology companies.
TOWARDS LOWER ENTRY BARRIERS Regulation should promote competition in financial markets by facilitating entry into the markets for new, smaller players.
