The Financial Conduct Authority (FCA) announced that it is collaborating with 11 other financial regulators and concerned organizations to form the Global Financial Innovation Network (GFIN). This is to promote the advances in new technologies like blockchain and distributed ledger technology (DLT). The announcement came this Tuesday, August 7 2018.
Around mid February, FCA made a publication, proposing the formation of a ‘global sandbox’. FCA formed a sand box in 2016 that works to provide services to innovative firms. Among others, these services include financial support to the innovative firms, and also introduces these firms to the market. The functioning of the sandbox, however was limited to the UK. In its proposal FCA mentioned the need of the firms to engage with other regulators, and therefore proposed the formation of a global sandbox. It mentioned:
“This (a global sandbox) could potentially allow firms to conduct tests in different jurisdictions at the same time and allow regulators to work together and identify and solve common cross-border regulatory problems, through tests. Under such a model, testing could span two or more jurisdictions.”
Building on this proposal, FCA collaborated with 11 organizations to make the global sandbox, called the GFIN, Global Financial Innovation Network. Along with the announcement, FCA also published a consultation paper where it describes the mission statement of GFIN as:
The GFIN is a collaborative policy and knowledge sharing initiative aimed at advancing areas including financial integrity, consumer well-being and protection, financial inclusion, competition and financial stability through innovation in financial services, by sharing experiences, working jointly on emerging policy issues and facilitating responsible cross-border experimentation of new ideas.
The GFIN will:
- act as a network of regulators to collaborate and share experience of innovation in respective markets, including emerging technologies and business models;
- provide a forum for joint policy work and discussions; and
- provide firms with an environment in which to trial cross-border solutions.
By doing so, the GFIN aims to create a global financial services system that serves a broader society by providing it with a improved level of service, experience and integrity. Of course it will do this by the use of new technology. Not only this, the network of regulators will allow these regulators to adapt to hasty development of the technology and finance industry and let the regulators better cope up with the issues faced in the regulation of these industries.
The membership has partaken Abu Dhabi, Australia, Bahrain, Hong Kong and others. The GFIN will be an inclusive community of its members; current members of the GFIN will be exploring the idea behind the global sandbox further. However the entire membership of the GFIN which will take the projects to its next step is still to be determined. Regarding the conduction of the project, FCA says that the GFIN may be overseen by a steering group with a smaller number of members. The steering group would be chaired by one of the members, where the role of the chair would be that of a coordinator.
In its proposal published in February, FCA also asked for interested parties to share their views and make suggestions. In the announcement that came on Tuesday, FCA summarized the feedback it received, mentioning that the feedback was positive. Some of the issues that were highlighted had to do with cross-border application. Among issues highlighted were artificial intelligence, distributed ledger technology, data protection, regulation of securities and Initial Coin Offerings (ICOs), know your customer (KYC) and anti-money laundering (AML).
FCA has been actively working in the promotion of blockchain. Last month it selected 11 blockchain crypto-related startups to become a part of the fourth cohort of its sandbox program. A total of 69 applications were received, out of which 29 firms were accepted. 11 of these were blockchain or crypto-related startups.