2021-06-15-UNDP-Towards_an_Inclusive,_SDG-Aligned_Governance_of_Global_FinTech_Platforms_BigFintechs_21页_621kb

A Principles-Based Approach to Governance of BigTech Digital Finance Platforms

This paper proposes a principles-based governance framework for "BigTech digital finance platforms" (BFTs), arguing for international cooperation and rules that maximize sustainable development benefits while mitigating risks.

I. Introduction

• BFTs bring significant opportunities and risks, particularly regarding sustainable development (SDGs), financial stability, consumer protection, and market integrity.
• Existing regulation often focuses narrowly and may be disjointed, especially in developing countries where impacts are often strongest.
• A comprehensive, flexible, and principles-based approach is needed, combining targeted domestic measures, regional frameworks, and international cooperation.

II. Governance Principles

Five key principles should guide BFT governance:

1. Ensuring Foundational Financial Regulatory Objectives: Prioritize stability, consumer protection, market integrity, and investor protection, including sustainable development considerations.
2. Developing Reflexive and Iterative Regulation: Use flexible mechanisms (innovation hubs, sandboxes, networks, Regtech/Suptech) allowing for rapid review and adaptation in response to BFT innovation and national/regional needs.
3. Fostering Responsible Actors: Promote transparency and accountability, potentially through mandatory SDG commitment and adherence to frameworks like UN Guiding Principles or OECD Guidelines (addressing limitations of their current scope/comprehensiveness).
4. Ensuring Oversight and Enforcement: Implement appropriate levels and forms of oversight, ranging from entity-level actions to co-regulation, possibly involving specialized bodies (like a Digital Stability Board) and considering public utility status.
5. Instilling a Commitment to Sustainable Development: Integrate SDGs into BFT business models, particularly in developing countries, through enhanced disclosure, due diligence, and board-level engagement.

III. Structures for Implementation

Governance can occur at national, regional, or international levels:

• International/Soft Law: Less binding, flexible tools (co-regulation, code development, principles) for setting standards (e.g., FATF in anti-money laundering); goal is consensus.
• Regional Approaches: Can set regional examples, harmonize rules, but face issues like extraterritoriality and high compliance costs for developing economies.
• National Approaches: Tailor-focused, addresses local needs; allows rapid response, but requires coordination to avoid regulatory arbitrage and clarity on international standards.

IV. Toolkit of Regulatory Approaches

A spectrum from permissive to restrictive, highlighting options focusing on SDGs and market impacts:

• Minimal Regulation:
  • Mandating Access: Open interfaces/fees for critical infrastructure.
  • Diversification/Rotation/Open Data: Requiring client data access or regular switching; challenging due to costs, redundancy, cybersecurity, and potential platform dissolution benefits.
  • Unbundling: Separating core services or those with cross-subsidization.
  • Prohibition: Generally unsuitable due to essential benefits (e.g., payment systems); however, adoption/non-entry rules sometimes applied.
• Moderate Regulation:
  • Direct Regulation (Tiered): Licensing regulated activities, potentially at different levels (e.g., systemically important stricter rules).
  • Self-Regulation: Industry-led rules/public oversight blend.
  • Co-Regulation: Public authorities encourage policy/articulation via formal agreements; need to manage private vs. public interests.
  • Public Utility Regulation: Designating platforms, managing fees (e.g., interbank transfer caps); trade-off between monopolist concern and market need.
  • Participation/Ownership: Public agencies become shareholders/operators.
• Additional Pro-Competition Strategies (under Minimal Regulation):
  • Merger Control: Prohibiting overly concentrated entities; not specific to finance, an established tool.
  • Code Review by Regulators: Inspecting underlying code for biases or security.
  • Flexible Rate Regulation: Setting defined max rates of return.

V. Conclusion

• BFT Governance Imperative: Rapid growth and potential systemic significance demand appropriate governance from all jurisdictions, ideally within a coordinated, multi-level framework.
• Principle-Based Importance: Clear foundational principles (Principles 1-5) are crucial to direct diverse efforts globally.
• Collaboration Needed: Effective governance requires close regional and international coordination, leveraging existing initiatives (like the Bali Fintech Agenda, UNCDF/UNDP) to catalyze action across different governance structures (domestic, regional, UN, G20, IMF, World Bank, BIS, OECD, FSB).