THE FUTURE OF REGTECH FOR REGULATORS – ADOPTING A HOLISTIC APPROACH TO A DIGITAL ERA REGULATOR

Innovate Finance’s Transatlantic Policy Working Group (TPWG) and Strategic Partner Hogan Lovells, a multinational law firm co-headquartered in London and Washington, D.C., today (June 23, 2017) launched a report titled "Future of RegTech for Regulators, Adopting a Holistic Approach for the Digital Era Regulator". This report provides insight into the current global FinTech and RegTech initiatives, which can act as inspiration, or instruction for the United States.

The paper explores the potentially transformative role that regulatory technology (RegTech) might play in tackling the fragmented U.S. financial environment by providing an overview of the international movement in innovation and RegTech, as well as the current efforts by U.S. regulators. It also puts forward a framework by which regulators can assess their drive towards becoming leaders of digital change. 

The field of RegTech has mainly targeted ‘process automation’, such as improving inefficiencies within regulatory reporting for financial institutions, and using technology to ease the burden of compliance. 

This report focuses on the greater potential of RegTech for regulators. Representing a broader promise to encourage a ‘systems evolution’ or re-designing of the regulatory architecture including digital financial infrastructure (DFI), which may encompass anything from payment systems to shared reporting utilities. 

A recommended RegTech framework to help regulators become leaders of digital changes is outlined in the report. It includes three broad approaches, which can be implemented alone or in tandem: 

1. Ecosystem - Government engaging with industry, such as LabCFTC in the U.S. and the Financial Conduct Authority’s regulatory accelerator can help identify new technology and market developments, allowing regulators to work closely with technology innovators and understand any process and regulatory infrastructure adjustments that may need to be made. 
2. Digital Financial Infrastructure - Implementing new technologies, such as real time reporting, shared utilities, or application programme interface (API) architecture, can help facilitate the streamlining of banks’ submission of applications, payment settlement, and securities clearing
3. Rule and Process Changes - Implementing new rules and processes to encourage and allow innovative solutions to regulatory compliance issues, both for the regulator and for industry This could include defining new regulation in a machine-readable format that can be applied automatically; or adjusting a handbook to accommodate the application of new technology such as blockchain compatible data protection or identity rules. 

Further details can be found by downloading the report here and by reading the article / press release published today in the FinTech News.