Building Regulatory Systems with Better Technology Awareness

AS TECHNOLOGY increasingly becomes a key foundational stone for financial systems, commerce, and global sovereign decisions, the challenge facing regulators is clear: how can regulatory frameworks keep pace with relentless innovation without stifling it, and how can they protect people while ensuring dynamic and fair markets?

- Srinath Sridharan

This question takes on added urgency when we consider the current regulatory situation, where multiple sectoral regulators, each with their own domain, are often expected to operate as though they possess a uniform understanding of technology, regulatory expertise, and the supervisory bandwidth for effective oversight. Such assumptions, while convenient, breed complexity and open the door to unintended regulatory arbitrage, with consequences that could destabilise the financial system.

These financial technologies have a profound impact on lives, markets, and the fabric of the State itself. They touch individuals banking on digital platforms, businesses transacting internationally in seconds, and even entire economies whose regulatory frameworks were not designed to deal with these rapid innovations. When a cryptocurrency exchange collapses, a data breach compromises personal financial information, or an automated trading algorithm misfires, the ramifications are swift, often severe, and far-reaching. Millions may be impacted in moments, while markets reel and trust in the system is eroded. Even the sovereignty of the State is challenged, as regulatory bodies find themselves in competition with global tech firms whose influence transcends borders.