The Islamic Finance News Europe Forum 2017 took place in London on 11 September. The Forum gave several insights into the Islamic FinTech regulatory space.
Ian Johnson, the Chief Executive of the Dubai Financial Services Authority (DFSA) (the regulator of the Dubai International Finance Centre (DIFC)) spoke at the Forum about his organisation’s approach to regulating the FinTech space. He said that regulators are engaging strongly in the sector, often at the behest of their national governments who are leading the charge as a policy matter. The regulator’s job was to allow innovation whilst maintaining systemic and investor protection.
Mr Johnson stressed that regulators cooperate and share information on FinTech via the Basel Committee on Banking Supervision, the International Organization of Securities Commissions (IOSCO) and other regulator forums. He characterised the UK and Australia as leading on FinTech regulation whereas his personal view was that policy makers and the industry should lead the charge with regulators following. A lot of FinTech innovations did not need to be regulated. For example, regulators were more interested in the outcomes of RegTech innovations than the processes. The DFSA itself uses a business intelligence tool to model risks (firm, individual and systemic) and respond to them. However, Mr Johnson said that no amount of RegTech innovations will replace human regulatory judgment.
Although policy makers are pushing for innovation, Mr Johnson said that ultimately it is regulators who receive the blame if things go wrong. In particular, cryptocurrencies are one of the main innovations that are giving regulators pause for thought. Mr Johnson’s team is spending significant time assessing the risks in this area. As ever, risk appetite is variable and a regulator must be conscious to calibrate its activities accordingly.