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DTCC Connection

By Tony Freeman - Executive Director, Industry Relations, DTCC | September 29, 2016

FinTech vs. RegTech: How Technology Disruption Intersects with Regulation in Securities
Tony Freeman - Executive Director, Industry Relations, DTCC

At SIBOS 2015 in Singapore it appeared that almost every subject had a blockchain angle. It was impossible to avoid the subject – and there was a lot of noise but not much signal. This was perhaps the period of maximum hype – with wide-eyed evangelists claiming that everything was up for grabs. Post-trade, including clearing and settlement, was certainly included as an area for radical shake-up.

A lot has changed in a year and SIBOS 2016 in Geneva has set a very different tone. This new tone was highly evident in the panel discussion entitled “When RegTech meets FinTech: The Day After Tomorrow - How Technology Disruption Intersects with Regulation in Securities.

The moderator, SWIFT’s Fabian Vandenreydt, was joined by no less than six panelists: Philippe Ruault, Chief Innovation and Digital Officer of the Digital & Innovation Lab, BNP Paribas Securities Services, David Rutter, CEO, R3, Peter Randall, CEO, SETL, Chris Church, Chief Business Development Officer, Digital Asset Holdings, LLC, Chris Corrado, COO & CIO London Stock Exchange Group and David Geale, Director of Policy, Financial Conduct Authority (FCA).

The panel set out to answer three issues: Can RegTech solutions be a better answer to meet regulatory and reporting requirements? Do FinTech companies need to extend their reach to disrupt regulation? Or ultimately, is RegTech the new FinTech?

Whilst these questions were not conclusively answered there was plenty of entertaining debate – and unsurprisingly a lot of it focused on the capabilities of blockchain technology. Since the last SIBOS several real blockchain projects have been launched and the establishment has put its arms around the concept.

For example, David Ruttrer’s R3 consortium now has 69 members. Whilst blockchain early adopters may be dismayed at what they see as the neutering of the original free-wheeling concepts, it seems clear that some core assumptions have been made that will allow financial markets to embrace the new technology.

Peter Randall neatly summarized these issues: he listed five areas where blockchain must improve to allow it to reach its potential: speed, capacity, fully integrated KYC and AML, the ability to move real-world assets and have many chains to co-exist. He didn’t actually state that financial markets will insist on permissioned blockchains and not open access. But he didn’t need to – it’s obvious and nobody disagrees.

To have achieved informal consensus in all these areas in one year is truly remarkable. What seems clear is that within two years real-world applications will be launched using the new technology. It’s highly unlikely that these will be replacements for existing clearing and settlement applications – they will instead be applied in the unexplored “blue oceans”.

It’s also clear that the terms “Fintech” and “Regtech” are actually buzzwords. There is no definition – and there probably never will be. Does it matter? Does anybody care? I doubt it.