Policy and oversight considerations for new financial innovations

Tokenisation

• Potential for tokenisation to restructure the financial system
• Ongoing innovations and their regulatory opportunities/challenges:
  • Transforming KYC checks with digital identity tokens
  • Issuer- vs third-party sponsored tokenised securities
  • Operational controls for recordkeeping
• Creating a regulatory sandbox, e.g. European Blockchain Sandbox, BoE DSS

Cryptocurrency: bitcoin and stablecoin

• Impact of cryptocurrency on financial markets and core central bank functions
• Key components of crypto regulatory frameworks:
  • Legal status of digital assets (tokenised vs non-tokenised)
  • Licencing requirements
  • AML/CFT standards
  • Oversight of DeFi platforms and cross-border transactions
• Challenge of maintaining regulatory pace with rapid innovation in crypto markets
• Overview of international standards, e.g. FCA Framework, MiCA, The Genius Act

CBDCs: wholesale and retail

• Defining wholesale and retail CBDCs
• Policy and oversight considerations:
  • Safeguards to monetary and financial stability risks
  • DLT infrastructure and atomic settlement
  • Cross-border functionality
  • Data privacy and consumer protection
  • Operational resilience and cyber security
  • AML/CFT compliance

Interoperability

• Importance of interoperability in supporting innovation, choice, and efficiency across the financial system
• Designing with interoperability as default through shared infrastructure and standards
• Overview of interoperability experiments by central banks, e.g. BIS Project Aperta, BoE Digital Pound interoperability proof of concept