Fintech sector needs more regulatory oversight: Bundesbank

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By Balazs Koranyi

<span class="articleLocation”>Financial technology companies require greater
oversight because they have the potential to disrupt the banking
industry and could threaten financial stability, Bundesbank
President Jens Weidmann said on Wednesday.

So-called Fintechs typically use advances in technology to
provide cheap and easy-to-access services, from transfers and
trading to crowdfunding, operating largely outside of banking
regulations.

“Getting a clearer picture of fintechs’ business activities
is essential if we are to better understand whether and in what
way they might pose a threat to financial stability,” said
Weidmann, who sits on the European Central Bank’s Governing
Council.

“Many believe the most disruptive potential is to be found
in blockchain or distributed ledger technology, which promises
to allow payment transactions and securities settlement to
bypass banks and central counterparties altogether,” he added.

Originally developed for the bitcoin virtual currency,
blockchain technology uses a decentralised network of computers
to verify transactions and may over time play a role in speeding
up clearing and settling, reducing the need for intermediaries.

Looking to react quickly, the Bundesbank recently launched a
project with Deutsche Boerse to develop its own blockchain-based
prototype of a securities settlement system.

Weidmann said advances in digital finance had increased
consumer access to financial services, but expressed concerns
over how fintechs would behave in an economic downturn.

He said assessing the risk was impossible without reliable
data.



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