For instance, I think of a paper by Freixas, Parigi and Rochet on “Systemic Risk, Interbank Relationships and Liquidity Provision by the Central Bank” published in 2000 in the Journal of Money, Credit and Banking (JMCB). In 2000, that is eight years before the crisis. And yet the paper already underlined the importance of interbank relationships in the spread of risk. Some trends and evolutions in research in economics and in the work of central banks over the last twenty years were also identified and discussed. Obviously globalization and international links have played an ever more important role in monetary and financial economics (including with the creation of the euro for instance). There were also changes in economic research, as more attention was progressively given to actual policy-making. One of the leading examples is perhaps the so-called Taylor rule, which was created to describe the actual behavior of central bankers. This allowed a much richer interaction between academia and policy makers. Changes also affected policy-making, with more attention paid to academic debates. These even influenced the very structure of central banks. Research units were put into place and developed in most major central banks, including the Banque de France, which also implemented an External Evaluation of Research (EER). Central bankers indeed realized the importance of conducting their own research activities to support policy making. Heavier use of theoretical findings and data-based analysis was made, in order for central banks to better articulate their policy actions.

How can we make regulation conducive to FinTech innovation, while still ensuring that the system remains stable, key players are sound, and consumer interests are safeguarded? This requires a keen understanding of emerging technologies and new business models, and being alert to potential risks, while taking care not to stifle innovation. Easier said than done! Let me give a few examples of how MAS has tried to strike the right balance. Take for example virtual currencies, or commonly known as crypto-currencies. MAS does not regulate virtual currencies; in fact, we welcome them as an innovation that can potentially reduce the cost of financial transactions. But we regulate the activities that surround virtual currencies if these activities pose specific risks. First, virtual currency transactions could potentially be exploited for money laundering or terrorism financing due to the anonymous nature of the transactions. And so intermediaries in virtual currency services will be subject to anti-money laundering requirements. Second, virtual currencies can go beyond being a means of payment to representing ownership of assets, as we see in many Initial Coin Offerings or ICOs. This makes them look very much like a share or bond certificate. So, if the digital token is structured like a security, then the ICO must meet the requirements of the Securities and Futures Act. This is to protect investors. FinTech developments are forcing regulators to review the way regulation is done. If FinTech is unbundling the financial services value chain, then regulators may have to “unbundle” their regulations too.