if they get very large and pose macroprudential concerns, then we may consider regulation. likewise, a payment service through the internet will not automatically attract regulation – these are typically small payments, often in connection with e - commerce. – only larger, more significant players that cross the materiality and other thresholds are regulated. – even then, we do not regulate them as banks and throw at them the whole kitchen sink of capital and liquidity requirements under the banking act. – we regulate them under the payment systems oversight act or the remittance agents act – modular regulation customised to address the specific risks or concerns they pose. – but i must acknowledge we do not have ready - made regulations for all new technology solutions ; often we must improvise the use of existing legislation, even as we draw up new ones. third – actively promote the fintech ecosystem and seek to harness its potential for good. while regulation must not front - run innovation, regulators must run alongside innovation • we must know what ’ s going on and be ready : either to promote or to restrain. there are three ways in which mas does this. one, we actively engage fintech firms to better understand emerging innovations and help them design their solutions for financial services. take for example cloud computing. • • our traditional approach was to deal only with regulated fis, not their service providers – but with cloud solutions proliferating, we changed tack – many of these solutions offered strong efficiencies and cost savings but not all models met our regulatory requirements for data integrity and protection. so we engaged in dialogue directly with cloud service providers to explain our concerns and at the same time understand the technology – the service providers then came up with solutions that met our concerns – and we modified our requirements to take account of new business models and technological capabilities. two, we allow our fis to experiment with new technologies in a safe environment. fis do not have to seek mas ’ permission to try new things. • responsibility lies with boards and management to assess the risks and put in place adequate safeguards • but with many innovations, it is not always possible to anticipate every vulnerability or whether there is a risk of breaching regulation. • sometimes, as nike puts it, you have to “ just do it ”. bis central bankers ’ speeches mas will therefore introduce a “ regulatory sandbox ” approach that aims to give fis more confidence to experiment and launch their innovative products or services within controlled boundaries. • the idea is not

the same entity, who is accountable to the customer? as the number of 3rd - party intermediaries involved in a financial service grows, there might also be increased operational risks. we will need to adapt our regulatory approaches. pay greater attention to market conduct, consumer protection, and technology risks. regulatory frameworks will need to become more modular and agile. entity - based regulation remains relevant for the provision of key services such as deposit - taking, insurance, and the offer of securities. but for the growing number of players who offer niche financial services, we need to rely increasingly on activity - based regulation. this is all still fairly familiar ground, as the fundamental structure of financial services remains largely intact. intermediaries continue to be at the centre, even as distribution becomes more decentralised with diverse players and new ways of connecting with customers. stepping a layer down, let us now examine the underlying infrastructure of financial services. technology is enabling a fundamentally different approach to financial infrastructure, compared to the centralised systems of today. take for example, open crypto networks based on self - executing smart contracts and noncustodial financial services, where users maintain control over their assets at all times. by replacing intermediaries and central parties, these networks aim to reduce both the cost and risk of finance. by decentralising key aspects of financial infrastructure, such as access, data, and code, open crypto networks can also potentially enhance inclusion and innovation. when firms of all sizes, and even individuals, can directly access financial infrastructure, it could mean more competition and inclusion. when transaction data is available to all participants, and not confined within the intermediary responsible for the transaction as is the case today, it could mean more contestability and transparency. w hen code can run directly and publicly on these networks, unlike proprietary code that runs on private servers, it could mean more interoperability and innovation. we are certainly not at the point where these self - governing networks can meet the high standards of governance, security, resilience that we demand of critical infrastructure. even so, central banks would do well to incorporate these innovations in designing the next generation of payment infrastructure. these ideas could be particularly relevant to the development of cbdcs. finally, we turn to the layer at the base of the system – the instruments, or forms of money that should confer the properties of a public good. 2 / 4 bis central bankers'speeches the decentralisation of instruments is most clearly