“We are living in very interesting times. Maybe even too much." Thus Paolo Savona, Consob president, provocative as always, at the opening of the Consob-G20 conference held today in Rome entitled "Regulating innovation in the financial system to power a resilient recovery". This time the reference goes to the relationship between technological innovations and finance and the consequent discontinuity between market operators and public authorities.
«Market operators run faster than public authorities and communicate through social and traditional media instead of using long and heavy official documents, as the authorities usually do. Furthermore, people's level of attention is also very low and occurs through short and incisive messages», comments Savona. How then to find a synthesis? “One has to be put in place collaboration between regulators", he claims. At the basis of the current debate on fintech, moreover, there is a social dilemma between economic freedom and the protection of less informed savers and "it is known that information asymmetry ends up putting efficient competition at risk". Technological innovation in finance, in other words, only exacerbates this gap. For this reason it must be managed and for this reason it is now (inevitably) extended to include ESG criteria, i.e. issues of environmental social governance. So much so that Savona talks about inclusiveness and sustainability. “Adequate and inclusive finance and digital innovation are strongly intertwined and provide the ground for completely new forms of financial market regulation and supervision.”
THE NEW FINANCIAL CONTEXT
The G20 has recognized the importance of technological transformation and aims to regulate the new financial environment. At its meeting on 13 October, the G7 reaffirmed the importance of international coordination and cooperation on digital money and payments and approved 13 public policy principles for digital currencies of the "Retail Central Bank Digital Currencies" to support and inform national policies in this field. Consob, like many regulators around the world, in fulfilling its statutory objectives of safeguarding the integrity, stability and transparency of the financial market as well as the protection of savings, as guaranteed by our Constitution, is required to define detailed rules and regulations to identify the regulatory framework.
“In doing so it would be remiss if it did not take full account of these waves of innovation. This process also leads to a greater diversity of actors, services and products which has greatly increased the possibility of opaque activities outside the known regulatory perimeters. Trends that have produced fragmentation by different regulatory agencies and asymmetry in the definition of rules», continues Savona. In this context, the real risk is the proliferation of a jumble of different regulatory frameworks between different regulatory agencies, which can indeed be very fragmented, and end up having many overlapping and inconsistent aspects.
The reference can only go to world of cryptocurrencies. "Operational and stability risks, such as those posed by the diffusion of cryptocurrencies, often move outside the current regulatory and supervisory perimeters, thus showing that the boundaries of these perimeters are becoming increasingly blurred", underlines the Consob president.
Furthermore, digital and technological innovations allow many more countries (especially developing ones) to enter the financial markets with innovative financial products and services. And this too poses new regulatory challenges. "We need to understand how to manage the threats that affect some of our most important economic and social values, such as privacy, competitiveness, integrity and stability of the general macroeconomic system," he adds. After all, this is the time of machine learning algorithms, artificial intelligence, robo-consulting platforms, blockchain systems. “Financial technology innovations will work more efficiently when they are built on the basis of the experience of independent authorities recognized by governments. Regulation provides not only a limit but also the legitimacy for innovation», he concludes. To do this, there are three elements: experimentation, transversality and international coordination.
