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Beside impacting nearly all aspects of everyday life, new technologies are also changing and disrupting the financial industry and the way consumers and firms access financial services.
But while technological innovation in finance is not new, investment in technology and the pace of innovation has increased significantly in recent years.
These include a wide array of developments ranging from social networks, artificial intelligence, machine learning, mobile applications, distributed ledger technology (DLT), cloud computing or big data analytics. FinTech also gives rise to new services and business models. At an international level, FinTech is a priority area for the G20, and the European Commission recently published its Action Plan on Fintech, which includes a series of legislative and non-legislative actions to be pursued in the short, medium and long term.
However, a substantial amount of uncertainty and confusion remains. Blockchain, for instance, is a topic that inspires equal parts fear and excitement. The aim of the conference jointly organised by ACCA and EY in Brussels was to shine an informed light on the latest policy development on Fintech and blockchain as well as risks and opportunities of ICOs.
The debate confirmed that despite many challenges and risks to be addressed - such as fraud, market manipulation and money laundering - crypto assets, ICO and blockchain will play a key role in the future.
FinTech has the potential to transform the way financial markets and market participants operate with a number of positive outcomes for consumers, like enhanced services and reduced costs. Distributed Ledger Technologies (DLT) but also Artificial Intelligence and RegTech are among the most prominent FinTech developments. ICOs could provide a useful alternative funding source for new or innovative businesses, as well as an attractive investment opportunity for consumers.
Gaël Denis, Partner, TMT & FinTech Leader, EY Luxembourg said: ‘Blockchain is raising several challenges and opportunities. It can bring more reliability on certain information, and also easier access to relevant information. But we also identified several risks, such as security on the custody on the crypto asset. There is also a valuation risk, linked to its volatility. Last but certainly not least, risk around anti money laundering and financing of terrorism, linked to the anonymity of transactions, which is making the application of laws in regards to Know Your Customer (KYC) due diligence and transaction monitoring quite challenging.
‘For the audit profession, we already anticipate certain trends: the certification of non-financial information will increase, and we will see the emergence of blockchain/crypto assets ecosytems with higher quality standards. This implies that blockchain will request certification of nodes, certification of algorithm underlying smart contracts.’