has demonstrated the difficulty of retrofitting regulation on new technologies and new business models after they have reached systemic scale. it is, of course, possible that neither of these two reasons - investor protection and protection against financial stability risk - will be relevant because the very instability and riskiness of the world of unregulated crypto finance, most recently demonstrated by ftx, will in the end ensure that the sector cannot grow. indeed, some have argued for regulators grappling with the crypto world to keep it outside the regulatory framework to ensure that users ’ ‘ caveat emptor ’ concerns prevents both growth and connection with mainstream finance [ 4 ]. and that leads to my third reason. forecasting the direction and pace of technological innovation is an even more uncertain game than economic forecasting. promising technologies fall by the wayside ; unexpected ones flourish. and technologies combine in ways that cannot be anticipated. but the technologies that have been pioneered and refined in the crypto world, such as tokenisation, encryption, distribution, atomic settlement and smart contracts, not only seem unlikely to go away as our everyday lives become more ‘ digital ’, but may well have the potential to improve efficiency, functionality and reduce risk in the financial system. a potential example of this is the integration of functions in ‘ smart contracts ’ that i mentioned earlier. a possible use case for such integration, which has been pioneered in the defi world is the combining the functions of trading, clearing and settlement of tokenised financial assets into a single, instantaneous contract, rather than being carried out in sequence by three separate institutions over a number of day. this, if applied to ‘ real world ’ assets, like equities, could offer a substantial improvement in the efficiency of financial market infrastructure and reduce risks by enabling instant settlement – t plus now [ 5 ]. there are of course risks in such integration as i mentioned earlier, whether it happens organisationally or technologically. the bank of england is working with the fca and the treasury to set up a regulatory ‘ sand box ’ for developers to explore whether and how those risks can be managed to the level of assurance we expect from the current system so my third reason for bringing the activities of the crypto world within the relevant regulatory frameworks is to foster innovation. this may appear counter intuitive to those who see regulation as opposed to innovation. but, as i have said before, ‘ people do not fly in unsafe aeroplanes ’. innovation may start in un

prioritise the repayment of eligible depositors by the fscs within seven days, or have their accounts transferred to another firm. these powers also seek to act as a backstop, complementing other important supervisory tools such as having comprehensive recovery and solvent wind - down plans for firms to withdraw from the market before failure. our disclosure requirements, as part of the raf, also reflect this proportionality, with only the largest firms currently in scope of our reporting and disclosure requirements. we are also taking a proportionate approach in applying raf for our international hosted firms20 by looking at whether they can achieve resolvability outcomes which are broadly comparable to our framework. in many cases these firms may be able to rely on group wide capabilities, avoiding unnecessary duplication. by requiring firms to meet outcomes and in not being prescriptive, the raf also acknowledges that the depth and type of capabilities required to remove barriers will vary by firm and firms may be able to demonstrate that certain capabilities are not relevant to them – simpler firms will need to develop correspondingly simpler capabilities. it also allows firms to leverage existing capabilities and so avoid unnecessary compliance costs. there is no one size fits all approach for banks to demonstrate their resolvability ; banks themselves are best placed to understand what they need to implement in order to ensure an orderly resolution process, keeping their preparations under review as they grow and change over time. we expect firms ’ boards and senior management to take responsibility for their own resolvability, and to satisfy themselves that, if the worst were to happen, they could be resolved effectively. for resolution credibility means effectively executing what we say we will do. the presence of a credible resolution regime supports our aims, meaning that we can be more confident that if a firm does need to exit, it can do so in a way which minimises contagion and disruption. the raf strengthens our confidence in these plans, by embedding increased accountability and setting strong expectations of firms and their boards. firms which are already at, or aspire to reach, a level such that their exit would cause an unacceptable level of disruption should factor our resolvability requirements into their business plans – as with any other regulatory requirement. firms whose failure is unlikely to have financial stability consequences also have a part to play : they need to take a forward - looking realistic assessment to ensure they prepare for the event that they fail, which is likely to be a bank insolvency, and meet pr