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Financial Stability Board: Blockchain Could Raise Cross-Border Data Issues
The Financial Stability Board has published a new report on fintech raising questions about data privacy and smart contracts.
By Stan Higgins
Updated Sep 11, 2021, 1:29 p.m. Published Jun 27, 2017, 10:30 a.m.
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An international group of regulators and government officials created in the wake of the 2008 financial crisis has released a wide-ranging report on financial technologies including blockchain.
The report grew out of a months-long process within the Financial Stability Board (FSB), which first revealed it was researching blockchain and its impact on the global financial system in February 2016. The board is composed of central bank governors and financial regulators from nations in the G20 group, as well as its predecessor Financial Stability Forum, and the European Commission.
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Though the study states that "there are currently no compelling financial stability risks from emerging fintech innovations," it outlines 10 potential issues that regulators should focus on. In the context of blockchain, the FSB report identifies the implications of the technology's cross-border nature and legal uncertainty around smart contracts.
The authors go on to note:
"These and other legal issues could be even more prevalent when considering cross-border activities. For example, blockchain has raised questions, such as data privacy concerns across jurisdictions, and identifying the location of an asset when no one bank or entity is the custodian of the record."
That said, the report also dives into the potential contributors to financial stability stemming from blockchain, including improved access to technology-driven financial services.
"Innovations such as digital identity and DLT-based applications could support improved quality and accessibility of, or financial services for, end-users," the report's authors wrote.
Ultimately, the report itself doesn't call for any concrete policy recommendations on the regulatory front. Rather, it echoes other international bodies in its advocacy for greater cooperation between countries.
That kind of approach, the FSB posits, "will be particularly important to mitigate the risk of fragmentation or divergence in regulatory frameworks".
Fiber optical cables image via Shutterstock
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