30 August 2022

FSB's Domanski: Making the most of digital payments – a cross-border perspective

Thank you very much for having me today. It’s a pleasure to be here in Frankfurt, especially after
a period when travel restrictions and Covid precautions made even the short trip from Basel feel
like a rather long journey. Thanks to digital innovation, we managed to get through the pandemic
with virtual meetings. And thanks to innovation, we have an important topic to discuss today: the
future of digital payments.

I will focus on the role of financial regulation in promoting efficient and safe cross-border digital
payments. I’ve chosen this topic for three reasons. First, the Financial Stability Board’s mandate
is to coordinate financial policies to enhance global financial stability. Second, digital innovation
is intrinsically borderless, so many of its implications are multi-jurisdictional if not global. And
third, most importantly from an economic welfare point of view, digital payments promise
particular benefits in a cross-border context. Many of us have grumblingly paid high transaction
costs in cross border payments. But those who are most affected are emerging markets citizens
working abroad, who still pay on average more than 6%2 fees for a $200 remittance payment.

So, there is a big prize to be gained, not just in terms of lower cost, but also in terms of higher
speed, security and transparency and more tailored financial services that serve a broad range
of users, including the poor and unbanked, at scale. G20 Leaders have long recognised the
need to enhance cross-border payments and, in 2020, tasked the FSB with developing and
operationalizing a roadmap to achieve this goal. Considering the use of new technology is an
essential element of this work.

Regulation is sometimes portrayed as an enemy of innovation, not least in the crypto asset world.
The current ‘crypto winter’ has made these voices somewhat less vocal and may actually provide 2
an opportunity to reflect on the relationship between regulation and innovation in a more nuanced
way.

The overarching principle that guides the FSB’s work on financial innovation is for financial
authorities to act in a way that harnesses the benefits of innovation while containing its risks.
These include risks to financial stability, but also to market integrity, consumer protection or
perhaps even monetary sovereignty.

In my remarks today, I would like to discuss how to translate this principle into practical policy. I
will first talk about the key elements that guide a policy approach that harnesses the benefits of
innovation -- technology openness and technology neutrality -- and then discuss how to
effectively contain associated risks, using our work on (private) crypto assets as illustration. My
bottom line is that from a longer-term, societal perspective, regulation is a friend, rather than an
enemy of innovation...

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