Template-Type: ReDIF-Article 1.0

Author-Name: János Müller
Author-Workplace-Name: Hungarian Banking Association
Author-Email: mullerj1@t-online.hu

Author-Name: Ádám Kerényi
Author-Workplace-Name: Centre for Economic and Regional Studies Institute of World Economics
Author-Email: kerenyi.adam@krtk.mta.hu


Title: Searching for a Way Out of the Labyrinth of Digital Financial Innovations - The Trap of Regulatory Challenges in the Digital Financial System

Abstract: We are monitoring the regulatory tasks and needs in relation to digital financial
innovations, which are emerging at a revolutionary pace in the financial system.
In the digital age, it is necessary to create the conditions for competitiveness and
security in the financial intermediary system. To understand this, we trace the
process of how regulators move from a big bang-like market emergence through
awakening and recognition to a confrontation triggering a need to act. This is
followed by the period of task definition. Effective regulation requires both an
analysis of the lessons learned from the period behind us and an outline of a possible
vision for the financial intermediary system. A twofold task must be carried out:
competitiveness requires the smooth progress of digital development, while the
functioning of the financial intermediary system must not be impaired by more
favourable operating conditions for digital financial innovations. The principle of
"same activity, same regulation" needs to be enforced. Regulation must achieve
a balance between these two interests, the absence of which results in regulatory
arbitrage and asymmetry. Technological innovations serving payment services,
artificial intelligence regulation and data protection need to be controlled. The
process of searching for solutions and the desired regulation has been disrupted
by the global COVID-19 pandemic, the economic and financial consequences of
which have accelerated some stages of this process, while elsewhere they have
had a slowing impact.

Classification-JEL: E58, G18, H21, O16, O36, O38
Keywords: FinTech/BigTech regulation, arbitrage, asymmetry, data-driven process, vision, taxation, social impacts
Pages: 103-126
Volume: 20
Issue: 1
Year: 2021
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-20-1-st4-muller-kerenyi.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:20:y:2021:i:1:p:103-126