they pose issues of authentication, identity • p2p lending platforms, crowdfunding – there are implications for consumer protection and fraud risk • cloud computing, big data – there is the issue of cyber security • e - trading platforms, algorithmic trading – there are implications for market functioning, both good and bad. • blockchains and distributed ledgers systems ( dls ) – this is potentially the most transformative innovation, at least until artificial intelligence comes along in a big way. many new technologies intelligently used can help to reduce risk. take for example dls. • decentralisation reduces concentration risk. a cyber attack cannot bring down the entire system because every player has a copy of the ledger. • speed of transaction verification reduces counterparty risk. this could potentially translate to lower collateral requirements, better capital optimisation. • imagine clearing and settlement in seconds rather than days. • but mind you, these are still at proof - of - concept stage. there is still no scalable market - wide solution in place. but contrary to what dls advocates proclaim, it is not without risk and may even introduce new ones. • the public dls is susceptible to malwares being uploaded into the system. blockchains are not hack - proof. • and as all data are replicated to very node in the system, there is a risk of compromise of privacy. so, each technology must be evaluated on its own merits. • and we must also consider which financial activity it is being applied to – blockchains in clearing and settlement systems are very different from blockchains in trade finance or e - kyc. second – adopt a risk - based approach to fintech innovation in the unregulated sector. regulation must not front - run innovation. • introducing regulation prematurely may stifle innovation and potentially derail the adoption of useful technology mas applies a materiality and proportionality test. • this means when the risk posed by new technology becomes material, then regulation comes in. • and the regulation must be proportionate to the risk posed. take for example internet - based payments or p2p lending that takes place outside regulated banks. • we regulate banks chiefly because they take deposits. – when they get into trouble, they have systemic consequences. – so, we supervise their lending activity and their payments systems. bis central bankers ’ speeches • we do not regulate p2p lending platforms – as long as they do not take deposits. – • but

to remove all risk. failure is an inherent part of innovation. • rather, we want to create an environment where if an experiment fails, it fails safely and cheaply, without larger adverse consequences. • mas will soon issue guidelines for public consultation on how the regulatory sandbox will work. three, we promote greater inter - operability within the industry to harness the full potential of technology. an innovative environment proliferates a wide range of technologies and solutions. • but if the solutions cannot interact with one another, we sub - optimise efficiency gains or customer experience. • while we should allow a hundred flowers to bloom, we should also take care we create a garden. greater inter - operability across data systems is therefore a key priority. let me give two examples of what mas is doing together with the industry. • • one, common standards for payments systems to realise more seamless payments across a range of platforms. – we are working towards a unified point of sales ( pos ) terminal – a single terminal that can read all kinds of cards at retail and hospitality outlets. – we are also exploring an “ all - in - one ” addressing system, that will enable us to pay someone electronically using the payee ’ s mobile number, email address, social network account, or other proxies. no need to know the payee ’ s bank account number. two, seamless data sharing through publication of open application programming interfaces, or apis. – we just had a two - day api conference earlier this week, where industry players shared their views on how we can take the api strategy forward. – mas is working with fis to leverage on new technologies to share aggregated data to improve market and risk analyses, forecasts and projections. we are committed to building a smart financial centre, where innovation is pervasive and technology is used widely to : • increase efficiency • manage risks better • create new opportunities • improve people ’ s lives. bis central bankers ’ speeches