Fintech can help promote financial stability and boost growth, governor of the Bank of England Mark Carney has said.
"Fintech could help make the system itself more resilient with greater diversity, redundancy and depth. These possibilities are why the Bank has already taken a number of steps to encourage fintech’s development," he said, speaking at the government's International Fintech Conference in the heart of the City today.
"The Bank of England’s Financial Policy Committee (FPC) is mandated to assess new and emerging risks to financial stability, including those that may exist beyond the existing regulatory perimeter. And it now has the powers to treat similar risks consistently, wherever they originate.
"With this new approach, the Bank can help build the right infrastructure for fintech to realise its promise."
A failure to keep up with such changes previously contributed to the financial crisis, he said, but that had lessons for its current approach which has included launching its own fintech accelerator, the first central bank in the world to do so.
"We can draw on these experiences to help ensure that fintech boosts growth and promotes financial stability," he said.
"The challenge for policymakers is to ensure that fintech develops in a way that maximises the opportunities and minimises the risks for society. We are ideally positioned to realise fintech’s promise in the UK. The Bank will work with the market and other authorities to build the hard and soft infrastructure the system needs to support innovation and growth, consistent with the City’s best traditions."
Carney said the central bank is now opening up applications to its accelerator for a fourth cohort of startups working in the financial technology sector.
"We are looking to work on new proofs of concept on maintaining privacy in a distributed ledger and applying a range of big data tools to support the Bank’s analysis. More broadly, the Bank is working to ensure that this time the right hard and soft infrastructure are in place to allow innovation to thrive while keeping the system safe," he said.
He also revealed the Bank of England has joined the created a distributed ledger proof of concept to help distinguish its "potential from its hype" and signalled settlements were a focus.
"Securities settlement seems particularly ripe for innovation. A typical settlement chain involves many intermediaries, making it comparatively slow and keeping operational risks high. Industry has begun to work together to determine how distributed ledger technologies could be used to solve these issues at scale."
The central bank has also joined blockchain consortium Hyperledger, Carney said.