The UK’s Financial Conduct Authority (FCA) has called for an international regulatory framework to be applied to fintech startups in order to prevent a ‘Wild West’ approach to governance of the sector.
In particular, the FCA is concerned that as different jurisdictions compete for fintech business, regulatory standards could suffer – not least in terms of the number of regulatory ‘sandboxes’ employed by different watchdogs, all with their own rules and standards
The comments were made by Christopher Woolard, the FCA’s head of strategy and competition, at the Innovate Finance Global Summit in London on Monday.
The UK was the first to develop a sandbox for fintech startups back in 2015, providing banks and startups with a ‘safe space’ in which to test new products and services, free from normal regulatory constraints
The concept has been widely copied by other jurisdictions, prompting Woodard’s concern that “a Wild West version could emerge which runs entirely counter to our ambitions” and risks “diminishing outcomes for consumers”.
“We also believe that a sandbox that fails to prepare firms to join the regulated market will not foster firms that succeed long-term”, added Woolard. “We also see potential risks to the reputation of and trust in financial innovation if there are examples of global failures in the future.”
The FCA accepts that there is unlikely to be one standard that fits all but building “common understanding and stronger international co-operation” around innovation will “help secure the long-term future of the industry” said Woolard, adding that the UK will be working with both the G20 and IOSCO to develop more global consensus around the issue.