So good evening, everyone. That's the last panel of the day. This has been a very dense day, and I very much hope we can use also the opportunity of this panel

to draw conclusions and wrap it up, also drawing on everything that has been said today. The panel is on innovation and regulation in tomorrow's world. So I also very much hope that it can be as much forward-looking as possible.

And innovation and regulation is not a new discussion. That's something that regulators have faced always to try to strike the right kind of balance between identifying future risks to the system,

making sure that markets can work in an orderly way, protecting participants, and at the same time, not stifling innovation. So that's not new. It's part of our job. But what's new is the pace of innovation, in particular, the pace of innovation in the financial service industry,

which lead us to reconsider the trade-off. And different supervisors, different regulators, different lawmakers have been on different sides of this trade-off, and there have been cycles, swings in regulation from being very supportive of innovation to being very defiant.

And these kind of cycles, these kind of swings will always be there. But we're at a time where we definitely have to think and try to figure out what will be the landscape within two years, five years, 10 years when we take decisions today. And that's something that will make a difference also

in terms of the quality of regulation that we can have this kind of forward-looking discussion. So we have the best possible panel, well, by definition, but that's true. So we have, from left to right, we have Cora von Nivenhosen, who's a member of the European

Parliament, Xavier Rollet, who's the head of the LSE, Stephen Meyer, head of ESMA, and we've got Simon Taylor, who's also an actor of that field, founder and CEO of 11FS,

and he's going to explain to tell us about 11FS in a second. In a second. So the way I would like to do it is to try to, so I'm going to guide you through that discussion. We're going to start with comparing notes

on the pace of innovation and what we expect in the years to come in terms of fintech and innovation more generally, changing the financial landscape. That will be the stock-taking part of the discussion, both in terms of financial services, also in terms of financial market infrastructures, which I think will be a big part of our discussion.

And then we'll move to the regulatory consequences. And hopefully, we can still have time to address cyber risk, also after what was an exciting presentation a minute ago.

And I hope you've checked your mobile phones. The screwdrivers are just outside of the room if you want to check your mobile phones. So let's start with the first round of comments on where do you see innovation heading, how transformational is that going to be, what can reasonably

be expected in terms of changes to the supply of financial services, changes to the way you do business. Let me start with the micro side of that industry. That is the players. So I will start with Xavier, and then with Simon,

and then we'll move to Cora and Stephen to get the broader picture. But I start with you, Xavier. Well, thank you very much, and thanks for having me here. I am keeping an eye on my briefcase, so don't anybody sit next to it, any sort of chip. I know we fill our share of news reports these days, but this is not the idea.

Innovation and finance, at the end of the day, it is about funding the real economy. Europe, unfortunately, has a pretty deep accumulated deficit in terms of funding innovation. And what we do as financial markets professionals, whether we're on the regulatory side, infrastructure side, intermediary investment,

or real economy and issuers, we try to inject, accelerate the turnover velocity of capital to ensure as much as we can that it ends up in the right hands, i.e. the hands of entrepreneurs and others who, through innovation, are gonna create new wealth. And Europe starts from, or continues,

from an absolute massive deficit in that respect, if we look at the pace of innovation in Asia, the patient of innovation in the United States. So it's clear that when we look at innovation in our own industry, we've gotta be open-minded. It's really about the future. It's not so much about who's the incumbent,

who's gonna benefit, who's gonna not benefit, who's gonna suffer, is how is innovation going to benefit the wider economy. And I would add one last point because there's no doubt that there are existing innovations, I'm sure we'll talk about DLT, blockchain a little bit later on,

or other forms of innovation applied to the financial industry, fintech, not just a payment system, but a range of other intermediation and other functions that place capital in the hands of entrepreneurs. But there's a fundamental factor, and I think the year the EU, and as well as our institutions,

regulatory, central banks, have a big responsibility going forward. And that factor is finance is not a national, a regional, but is a global game. And if we fragment, if we retrench, if we separate ourselves, if we raise the barriers, if we say, you cannot do this here,

or this that belongs to us, you cannot do it over there, we will not serve the cause of innovation. And if you look, for example, at the underlying structure of distributed ledgers, that will not work, whether we look at the CSD environment, whether we look at clearing, whether we look at other distributed technologies, it will not work if regulators around the world

don't agree to some sort of framework. You cannot implement it somewhere and have it bump into a border barrier somewhere. And I think this is an area where Europe going through an experiment of getting nations together to share infrastructure, to share decisional powers, to share regulation, has an opportunity to lead the world,

but it must embrace innovation, certainly in finance. So we'll move to regulation later on, and we'll have time to discuss regulation in more detail. But just to push you a little bit further Xavier, are you suggesting here that you see, I mean, that there is a sense of lack of cooperation, coordination between different regulators,

or are you frustrated or do you see it happening? It takes a lot to frustrate me. We take a lot in infrastructure. No, I don't think it's about regulators being in a state of denial. I think we're facing something completely new. If you're a systemic regulator, for example,

you have to consider your systemic management obligations. If you're a conduct, and we'll hear about, of course, no doubt from Stephen, you have to look at how standards of behavior can be harmonized. So it's a challenge. I don't think it's something that regulators are saying today, we don't want it. But there is also, we just can't deny

a basic geopolitical fact that we have a global economy that is global, that is globalizing at an accelerated pace, but we do not yet have a global financial governance system. And in fact, we don't even have, and it's even lagging further behind,

a global political governance system to handle our global issues. So I think regulators have an opportunity to try to lead and maybe nudge the political class in saying, we can agree together in terms of global standards, and that can benefit industry, that can benefit finance, that can benefit services. Will you please support us?

So regulators will have their say. Stephen, you'll have an opportunity to comment. But before we move to the regulatory discussion, I would like to maybe to dig a little bit deeper into the opportunities and challenges created by FinTech more generally. So Simon, you're an actor in the DLT universe.

Can you tell us a little bit more about what you're doing and where you see the challenges? Indeed, thank you. So 11FS is a consultancy I co-founded. We help CEOs, FMIs, banks, and governments and regulators really understand both distributed ledger and FinTech.

My background is I helped build the Barclays Accelerator program and then went on to lead Barclays Research and Development into blockchain for many years. I was a co-founder in R3 and so on. So a great deal of experience there that we're looking to bring to a number of parties. And for this audience, I think the primary observation when it comes to the question of how will innovation

affect the industry, how will innovation affect regulation, the primary question is, well, do you believe it's going to stay at the fringes or not? Because my observation has largely been that FinTech has been at the fringes. It's played in the gaps in the value chain. But what's happened is last year, I think,

Santander put a report out with Oliver Wyman called FinTech 2.0. And the idea of FinTech 2.0 was that for every vitamin that the UN puts out, they put out 70 paracetamol. In other words, the banking industry doesn't need things in the margins. It needs things that solve its real problems. And the great thing about startups, the great thing about FinTechs is they can very quickly

build answers to problems, which is why I was encouraged earlier to hear people talking more about sandboxes, to encourage these FinTechs to really work with those problems. But it requires each and every one of us to be hands-on with those FinTechs, helping them understand the problems. Two people in a garage may have all of the enthusiasm in the world,

or two guys that just left the trading desk may have all the enthusiasm in the world. But they don't necessarily understand the intricacies of FMIs and market structure and some of the problems that need to be solved. And I see a lot of encouragement from banks starting to do that. But when it comes to getting out of the fringes, that's a way to encourage out of the fringes.

I do think there's a threat side of it as well. I look at what's happening in China, and I see Ant Financial, I see Tencent, I see organizations that are truly different to banks that are leveraging data. So you have in Ant Financial, you have a company that started as an e-commerce business. They used the data they had in e-commerce

to be able to credit score. Once they could credit score, they were able to lend. I think this is the sort of thing where we're seeing people use data to really transform and move into the financial services industry. It tells me that the market wants financial services across everything from capital markets right down to the retail consumer,

but they don't necessarily need banks. So therefore, that begs the question, how do you use data better? How do you make set data free? And I think the paradigm about how we've been doing that has historically evolved. We've had data trapped in banks. We've had data trapped inside central banks. We move data around and we argue about the format.

These large tech companies don't have that issue. They manage to monopolize all of the data. I don't know that we really want that second option to be our future, but in order to prevent that future, we have to seriously think about how do you make something like data more portable? How do you make something like data easier to perform algorithms on?

And how do you manage cyber risk whilst you're doing that? So where does innovation come from? I think it comes from really rethinking how we do regulation entirely. I think it comes from not changing the rules, but changing how we set the rules. Changing how we set the rules themselves to involve sandboxing. So if we can encourage a startup to be in a sandbox,

can we build rules in a sandbox? Can we test rules in a sandbox? To me, regtech becomes the key innovation going forward and the thing that allows fintech to go from the fringes to be the power seat of our industry and really take the pain away.

So building on what you just said Simon and before we move to the regulatory approaches, I guess one additional question we've got to ask before we can draw the consequences is how is that going to change the system as a system? And you've started discussing it. How is that going to impact not only services

being provided by different institutions, but also financial structures? And what comes to mind obviously is the different roles of banks and non-banks and whether this is going to be internalized by banks or whether this is going to stay outside of banks. And here I would like to ask a question to the audience. So that's the first question.

Can we have it on the screen? So who will lead digital innovation in the financial market? Is that going to be banks? Is that going to be non-banks? Or is that going to be joint ventures between banks and non-banks? That's fantastic. Wait, the bankers are back.

Slower, they're slower, but they're back. Okay. So to be fair, it has to be some kind of joint venture. So the outcome is logical.

But what's interesting is that only 5% of this audience believe that only banks can make the best out of it. Only 5%. Simon? I'm a big believer in playing to your strengths and doing what you're good at. And I think banks have had to be good at technology. They've had to adopt it. But I don't know that that's their biggest strength.

I think their biggest strength is being the trusted party in the middle of two transactors. I think the managing risk, managing liquidity, is where banks are really, really strong and where they should probably continue to focus and maybe even optimize. The banks as they exist today tend to do a whole stream of things, a whole stream of activities, including running tens of if not hundreds of data centers

around the world. Is that what a bank needs to be in 20 years? Or does a bank need to allow people in to do the things it's not good at and to focus really tightly on what it is good at? I think that's not so much a joint venture, but it's as much as anything, it's a different vendor strategy. It's a different way of thinking about partnerships.

And I think it's a different way of thinking about procurement, which is arguably the most broken bit of any bank. So Stephen and Cora, I mean, it's part of your job description, I guess, to see the system as a system and to identify the public interest. So how do you see that discussion on how this will impact the structure of the system going forward? Thank you very much, Benoit, for the introduction.

It's very good to be here at this event. If you're looking at the financial sector, to some extent, we didn't have a sufficiently high impact yet from technology. If you compare banking to some of the other areas we're all involved in on a daily basis, if you go to travel or music streaming,

or even using taxis, we can see in those areas is that the day-to-day experience as a client has really improved as a result of disruptive technologies. If you then go to the financial sector, although there has been some inroads, there have been made, for example, with crowdfunding, or there has been with automated advice

or distributed ledger technology, to some extent, and as said by Simon, that is still on the fringes. So as a regulator, to some extent, you would like, although as a regulator, you obviously look both at the risks and the benefits, to some extent, you would like to have new technologies, because I'm really convinced that it can help

solve some of the key quality problems that we're faced with in the financial sector. On the point of Xavier, you want to react already at this stage on the regulatory issue? Later, a little bit later, yeah. So, as I said, I think as a regulator,

obviously, you look both at the risks and the benefits. Within ESMA, we have a dedicated team looking into financial technology, and technology and how it impacts financial markets. But as I just said, I would hope that it becomes, to some extent, more disruptive and solves some of the key elements, key problems for consumers in financial markets,

like transparency, simplicity, and also the cost performance. One of the problems nowadays for a lot of consumers is trying to get reasonable returns on their investments. We know that the distribution systems, for example, of the banking sector is still quite expensive,

and that, for example, direct distribution of financial products could be a way to lower the cost for the consumer, and you would hope that there also automation of advice can help to bring the cost down. Cora? Well, I think what we have learned today is what you see happening all over the world,

not only in the financial sector, but throughout the real economy as well, that digitization is here to stay, and it's moving at a very high speed. I think the expression that we are not living in an era of change, but we are living in a change of era, is really understandable now, because all of the new technologies come in together,

and they are disrupting the whole thing. If fintech could be, with a very small definition, be the marriage between the financial sector and technology, then immediately it is clear that it's not just the banks, it's also the big techs, and it's also the small fintech startup

out in the garage. And we need really to speed things up, also on the regulatory side, but we have to be cross-sectoral. There has to be a holistic approach, because for all of this, we need connectivity.

Until 4G, we were just connecting people, and now it's been mentioned many more times today, with the Internet of Things, we need 5G to connect the things as well, and for that, we need to have the right infrastructure. So we need the fiber, we need the satellites as well for the remote areas. I think that's one thing

that we really shouldn't forget about, the connectivity, because for the consumers, they will want to use it. Fintech will offer them more choice, more convenience, lower prices, higher speed. For the financial sector themselves, it will give the possibility of all sorts of new tools,

new services, also lowering costs, more possibilities in transparency, securing reporting. There are so many opportunities, and if you see what is happening in the rest of the world, they are investing so heavily. We really should move on,

and the need for speed in Europe, I think we must not underestimate, but really push it. So one particular area where the things are moving particularly fast is the post-trade industry, and DLTs, blockchain has been mentioned already several times, but that's clearly an application point where things are moving fast.

And I will obviously ask Xavier about it, because you're the most certainly on the front line when it comes to the clearing and settlement industry. But before that, I would like to ask another question from the audience. So when do you think CSDs

will fully move to distributed ledger technology? Is that in one year? Is that in three years? Is that in 10 years? Is that never?

Interesting. It's moving. It's still moving. So the average seems to be around, I don't know, seven, eight years.

But yeah, 40% never. So Xavier, what do you think about it? I'm somewhere in between 10 and never. More seriously, CSDs are the last line of defense. Clearing houses are not lenders of last resort. They're circuit breakers,

basically designed to isolate, contain, and manage instances of default in a financial sector. But CSDs is where ultimately systemic regulators, central banks, can assess and continue to monitor and control who effectively owns the asset. So that last layer is basically

what underpins the whole of infrastructure. So in terms of moving a technology like DLT, which on paper is remarkable, and I think is an innovation where all of us, we spend quite a bit on it, but everybody should continue to spend. But frankly, and this goes back to the first point, the first comment that I made earlier, I do not see an environment

where DLT can become a useful technology underpinning full CSD operation or majority of CSD operations. If the standard is not agreed and enforced and monitored and regulated across all the major markets in the world.

Can you imagine the EU going through a DLT technology in each CSD with all the cross-border flows with the US and China, which eventually will open up, and Japan not being on the DLT technology? It simply wouldn't work. That's why we need a global financial governance system, which itself will call for some form

of global political financial governance. And I think the stresses in the political arena today will probably lead to that emerging perhaps sooner than we think, and certainly I hope it will be soon. But around financial infrastructure, and particularly, as you said, so the post-trade aspects, clearing and settlement,

I think there's also something very important that is specific to Europe, and which is a big picture change that needs to happen. Europe, many decades ago, geared itself, decided, I think this was as much a result of history as a conscious collective political decision, that it was going to finance its corporate sector

and its government sector through debt. It is the most indebted, most leveraged, I would say developed economy in the world. 80% of corporate funding today comes from debt and essentially bank lending. That is not the way an innovative economy funds itself.

That is certainly not the model in the United States. And this is where I think the earlier comment about cooperation, for example, between banks. Banks are a leveraged way of funding economy. They collect our deposit, they leverage the balance sheet, and they accelerate the turnover velocity of money to lend it to entrepreneurs and other wealth builders. But banks need to leverage.

I'm actually not sure that the last, let's say 200 years of capitalist history show banks as a prudent managers of their risk and balance sheet. Every major crisis in the history of capitalism has been a banking crisis. So there clearly is a connection between systemic inefficiency or systemic failure

and leverage. Leverage also happens to be highly subsidized in the EU. But that's another public conversation for another day in another forum. So what I think where I think FinTech and particularly in the post-trade area is particularly helpful, which is like companies like ourselves who were not in the post-trade businesses

seven or eight years ago started by acquiring technology capabilities around the world. We started with the building blocks, technology so as to apply that to modern clearing. For example, the compression service, 90% of the world's over-the-counter derivatives, interest rate swaps, forex, around the world.

These are enormous amounts. They're cleared in Europe owing to compression services. That's a FinTech innovation. It's a complex one, but it's definitely an innovation. And where I think cooperation between banks and non-bank FinTech innovators can be extremely powerful is I think it will also help banks deleverage

by creating unlevered ways, some which are effectively far more efficient than the way we distribute capital today through leverage, but creating unlevered way to enable the vast unused amount of capital that is sitting on corporate balance sheets today in Europe

or in other form of asset management areas to help direct that to those who need this capital, namely entrepreneurs and innovators. So where FinTech and banks can really cooperate is by facilitating a recalibration, a diversification of our exclusive dependency on debt funding. And banks can play a useful role there

because they fundamentally do understand how money moves. It can help them delever whilst, through joint ventures, satisfying their customer needs for funding, particularly for small and mid-sized enterprises, which are perceived to be from a risk standpoint riskier.

And it's true, many of them go bust. You don't want to leverage your balance sheet naturally to fund SMEs, but if you can develop ways and means by which FinTech innovation helps you as a bank because you have the network, mobilize some of that investment management unused capital and direct it towards your customers, even if your own balance sheet doesn't intermediate it.

That's very effective. And the whole post-trade industry, certainly since 2008, the G20, GA, central banks, FSB, and a whole range of regulatory decision backed by political will, is to ensure that the originate distribute model, the traditional capitalist model,

everybody could trade with each other and accumulate exposure. Some known, most of it unknown to regulators, needed to move onto platforms where it could be netted, compressed. It's obvious that risks between participants often originate from, say, a corporate or some other form of asset management origin

can be netted, can be compressed. And this is today where I believe existing working financial technology innovation is today as its most powerful. The compression service of the London Clearing House in 2015, the 2016 numbers are much larger, compressed $110 trillion across 18 currencies.

It's just an equivalent of risk. Eliminated $110 trillion worth of risk, saving its customer base $25 billion of regulatory capital. That's FinTech innovation as well. So I've got two comments on what Xavier really just said, and then I will give the floor to Cora

to elaborate on the regulatory consequences. But two comments are first, I agree 100% with your view, your vision, that innovation should be instrumental in changing our financing mix towards something which would be less centered around bonds and more centered around market financing. It shouldn't be all about regulatory incentives

or legal incentives. Technology is the best way to do it because it's market driven. I absolutely agree with the premises. Now, of course, as you also rightly said, I mean, the whole global exercise since Pittsburgh,

since the Pittsburgh summit has been about making grouping transactions on platforms to make them safer because the system, because risk was thinly spread across markets and we wanted to know where risk is located and we wanted to have it properly managed by the private sector and risk to be properly mitigated.

And that's everything we've done on CCPs in particular, in CPMI OSCO, in the FSB, et cetera. We want these platforms to continue being safe. And now we're hearing that, well, it's fantastic because now innovation will make the whole system decentralized and making the system decentralized will make it safer.

Which at face value is exactly opposite to everything we've said over the last 10 years. So we've got to be careful to square that contradiction and to make sure that the degree of decentralization which is brought around by blockchain technologies and the like will not make the system unsafe.

So I just wanted to throw that thought into the discussion because here we need to be consistent. So Cora, on the regulatory consequences. Well, I think the problem with legislation and regulation is always the timing. It was mentioned already before today. It must be too late and also not too early.

So finding the right moments is very difficult part of it because developments are moving so fast. I think one of the things that regulators and legislators should do is try to at least follow and understand what is happening with all these developments. Am I allowed to ask a question to the audience

that is not on the screen? I'm not sure we have the technology to do it, but they can raise their hands. They can raise their hands, it's fine. We can do it manually. Which one of you has bought some virtual currency like Bitcoin, who owns the virtual? That was what I was expecting.

And I think that is not good. Not that you need to invest in it, but I would encourage you all to buy at least a small amount of Bitcoins or another, just to experiment, to see how this works. Because how can you talk about it if you do not know how it works? For example, I did it in the Netherlands

and it's amazing to see where in small restaurants, snack bars, furniture houses, you can pay with Bitcoins. And then immediately you start thinking about the anti-money laundering and about the tax evasion, because there's no VAT on it. And then you say, hey, what is this entrepreneur doing?

I think it's about understanding how it is related to the real economy. So it won't be a big investment, but I think it will be an eye-opener for all of you if you buy just a little bit of it. It can also be another one. It doesn't have to be Bitcoin, but it helps. And I think that's the same thing,

not just in buying a virtual currency, but on DLT. There are so many misunderstandings about open DLT blockchain, like Bitcoin, but the permissioned ones, I think that really is the future. And the sooner we understand how it works, the better.

So I would encourage all regulators to start experimenting with DLT as soon as possible. Hire not only the lawyers that were usually the traditional supervisors, but hire the millennials with a technology background,

the ones that can write and read the algorithms. Because if we do not understand, especially in combination with machine learning, if we do not understand how these algorithms work, is there a bias somewhere? Then maybe we are awaiting a new systemic risk that we don't see coming.

So I think it's of the utmost importance that we invest, all of us, and reskill in understanding how the new financial world will look like and that asks an investment from all of us. But I think it is necessary, but you see the rest of the world stepping up as well.

See what's happening in Singapore, in countries like Mauritius or Kenya or Australia. It's all over the place. And if we want to make sure that we have a part of the global FinTech pie, we won't get it for free. There's no free lunch and certainly also not in FinTech.

May I ask you about the interaction between FinTech and Capital Market Union, where the European Parliament is a leading force. And we like to think that Capital Market Union should facilitate FinTech. But what Xavier said earlier is that FinTech should facilitate Capital Market Union, which I agree. I agree fully.

I think FinTech is an enabler for the Capital Market Union and not the other way around because there is no Capital Market Union yet. Of course, we are working on it, but it is not a union. There are so many differences. Well, you all know it in the insolvency, et cetera. We are working on it, but it's not there.

And we can make it easier and enable it through FinTech. I think FinTech by definition is cross border, without borders even. So that makes it a lot easier to achieve a true Capital Market Union. And how much tolerance will there be in Parliament

for experimentation, sound boxes and letting things happen? I hope a lot because there's also something where there's a lot of misunderstandings about. Some people think that when we're talking about sandboxes that it's a sort of a regulatory light regime or waivers of certain regulations.

No, I think it's a mental shift, a change in regulators, not just checking all the requirements, ticking the box, but how can we help you? How can we maybe find other ways of you to be compliant? It's more the regulator looking over your shoulder, trying to help solve the problem

in order to create real possible growth. I think it's more the attitude and it's certainly not distorting competition or disturbing level playing fields. That can never be the intention, but it's more a positive attitude.

How can we help you? How can we make this happen? And find other ways to be compliant. So Simon, do you want the regulator to look over your shoulder? Is that fine? And so I think that there's something really about regulation when it comes to being data driven. Rather than prescribing for all the things that might go wrong before we do something,

how do we do something in a controlled way in a sandbox and then let the data decide what has actually gone wrong and then how do we adjust around that? A classic example is we mentioned Bitcoin a moment ago and when Bitcoin first came on the scene, everybody said, well, this is horrible. Let's kill it and get rid of it. And granted, I still don't think it's amazing,

but I do think it is from a technological innovation standpoint, misunderstood. When we looked at it at Barclays, we found it was far easier to identify money laundering in Bitcoin than it was in most other payment systems around the world. Why? Because you have a payments record of every transaction that's ever happened between every counterparty.

That is an argument more for DLT than it is for Bitcoin. Don't get me wrong, but actually the point is well made. Unless you experiment with these technologies, you'll never find them out. And I think sometimes we tend to push something away before we learn about it. On DLT, going back to the audience question briefly, there was a point there about

will we ever adopt DLT in post-trade fully? Will it be never? Will it be 10 years? I look at it as the same question as will we ever be cashless? It's kind of a, it's a gradual ramp. Yes, eventually we'll displace it, but actually it's coming in generational shifts. And I don't think it necessarily implies a removal of CSDs or FMIs.

FMIs play an incredibly important systemic role, not least setting the rules and making sure people follow them, taking risk of managing counterparty risk and, and, and. But I want to go back to the, so the conversation one of the speakers had earlier about being in capitalism 2.0 versus capitalism 3.0.

And capitalism 2.0 assuming that we need a central power to answer all of our problems, versus 3.0 which is more distributed and having new business models around that. And I think Xavier pointed out that really the advantage here of distributed ledger tech is the new business models it might enable. So when we looked at distributed ledger tech initially, everybody thought, ah, this will get rid of central bodies,

will get rid of centralization and things will magic overnight and the market will change. But then when you scratch a little bit deeper beneath the surface, in order to achieve that, what you had to do was fully collateralize every transaction in every financial market ever, which suddenly just kills all of your liquidity

and makes the whole thing stop, stop making sense. So you start looking at it from a point of view of, well, what do I use here? What does distributed ledger give me that I didn't have before? Because before I could have fully collateralized every transaction and I could have got to real-time settlement with incredible liquidity risk

in the market and credit risk and settlement risk. But I didn't want to do that for a lot of good reasons. So I now find myself in a position where we've got this technology, Bitcoin, produced something where I can see every transaction amongst every participant, but I can't necessarily see who's transacting. How do I take that idea and start to implement it in various settings

like payments, like financial markets? How does that solve problems like money laundering, preventing terrorist financing sanctions? How does that solve problems for financial markets around creating more sources of liquidity? One of the shortcut phrases I really liked that one of the vendors in the blockchain space has used

is if you can see what's happening inside a financial system, you can create opportunities for Airbnb of liquidity. In other words, when liquidity is stuck or liquidity is housed somewhere, can that be reused in new and interesting ways? Maybe that's creating more leverage. Maybe it's not the right idea. I make the point simply to say that we get innovation

when we start being able to see everything that's happening. Historically though, the way we've seen everything that's happening is for one central body to take all of the data into one place. I don't know that that's what we need in terms of new regulation. We don't need to centralize more data. I think if anything, we need to be able to see the data,

think about solar panels, think about wind. We need to have it more distributed, not 100% distributed like Bitcoin, but somewhere in the middle of the two. So how do we create this permissioned world in which we have new business models with distributed ledger? And I see the experimentation coming for the likes of Euroclear and Clearstream and many of the CSDs and ELSEG as well

as being really, really key to identifying what that is. But we have to be transparent about what we've learned from those and how we then start to standardize them. I think Xavier's point is really, really key. But again, how do we change how we build standards? Typically, that is we get some antitrust lawyers in a room and some consultants and we start to think about, okay,

how do we 12 brains come up with the answer? Whereas actually, the previous speaker pointed out, maybe that's not the right way to come up with the rules. So my question, my ask of the audience is think about how we do regulation more than what regulation we need to do. So that's a good question to ask Stephen.

Many questions and comments on rulemaking. Let me make a few remarks. I think it is very clear is that just like scale has generally benefited the EU, has benefited the internal market, has benefited the development of a capital market union.

I truly believe that it also can help the development of technology. If you would have all kinds of different arrangements per member state, per jurisdiction, obviously it would be more difficult to roll out a new technology. So very clear that standardization and the bigger the better to some extent,

the more regions would be covered, the bigger the benefits would be. And to some extent that has been happening very clearly in the past basically 40 years. And even with some extra speeds since the financial crisis, we sometimes tend to forget that the reforming in response to the financial crisis was not only a response to stability risk,

but also really has established an internal market and has achieved, for example, an enormous change in post trading where we now have a pretty close to a true internal market on the post trading area, both for clearing and also for settlement. So I think that has been very good. Obviously from an ESMA perspective

and as a European bureaucrat, that is where you want to go. But we all observe how difficult that is now in the current environment. We have seen the new complexities because of Brexit, because of the first indications on global financial regulation coming from the US.

Very good to hear that Xavier thinks that we can nudge them in a certain direction. That might be very optimistic for some cases. But clearly we will continue to push for the ideas that you want to establish global markets, want to have consistency, although the political directions at this stage question whether that we can make the same kind of progress

in the coming years like we have done in the past, let's say 10 years after the financial crisis, where really the financial crisis was a very important momentum trying to get to these common rules and regulations. Then more to technology. Interestingly, I think we should not think is that new technology means just leave it alone

and the less regulations there will be, the better it will go. If you for example go to crowdfunding, we have studied and looked at the crowdfunding at ESMA. Our recommendations two years ago was we need to have a common standard across the EU for crowdfunding. There's clearly both risks

in terms of the risk to consumer detriment, investor detriment, but also risk from a business opportunity is that if you develop this crowdfunding platform in one member state is that you cannot use it in other member states. So this would be precisely an area where more regulation or at least a harmonized set of standards across the EU would help developing this new technological development.

To some extent, we have seen the same with, or we're seeing the same with automation of advice. If you now look around the EU where there's been the biggest advances in terms of automation of advice, it's been in those member states where there are limits on the possibilities

to ask for commissions. It's been those countries that were forced to think about cheaper distribution networks that where there's been the biggest advancements in terms of automation of advice. And this is precisely an area where we have left more discretion to the member states. And so these could be areas

where you would say that more harmonization indeed could help developing this technology. On the distributed ledger technology, as indicated, we have done a discussion paper in the midst of last year on the topic. We will very quickly next week come with our results

on the basis of this discussion paper. A couple of key elements which are also already indicated by previous speakers is that, well, first of all, we should realize the technology is already around for nearly 10 years. It was 2008, I think, that the first Bitcoin distributed ledger technology started.

And so if you look at the progress so far, it's been actually quite slow. Where I think there's the acceptance of the idea at this stage is that the actual application is relatively modest. And I think I would probably agree with the indications of those persons that went for the plus 10 year in the answers. There's still a lot needs to be happening

to make this into a broader technology used, broader for settlements and really applied large scale. Clear problems to develop this is the parallel development of this new technology and the fact that we have the traditional system still existing, the fact that we have company law requirements,

that we have legal requirements regarding finality. And so this will make it very more difficult to develop this technology very broadly. At least our assessment and that will come out of the report next week is that for let's say the first stages of further using distributed ledger technology,

we think that the existing legal framework doesn't hurt is that they within the framework of the current CSDRs, et cetera, is that this technology can develop at least to a certain scale. Obviously, when it starts to be broader, you need to look at that again. And I think there, that is also the role that I see for regulators is to monitor these technologies early on,

see how they develop and confront them with the existing regulatory framework and see whether there's any constraints that hamper the development of the new technology. Thank you, thank you. Thank you, Steven. And let me, let me, let me

reaffirm very strongly what you said on global cooperation. And that is also a to reassure, to reassure Xavier that there is a lot going on in terms of global coordination and cooperation on FinTech. Here I can speak not as ECB board member, but as chairman of the CPMI in Basel. We are spending a lot of time

discussing the changes brought about by DLTs. And we have a report, by the way, coming out in a few weeks, I guess, on DLTs in the clearing and settlement segment. And we had another report on virtual currencies, digital currencies last year.

The FSB is doing a lot of work. The Bundesbank and the Minister of Finance here in Germany had a great conference last week in Wiesbaden as part of the G20 workstream. It's clearly stated as a G20 priority by Germany

to bring forward to work in FSB on FinTech. I once joked in an FSB meeting that there are probably as many people in the official community working on FinTech than people actually doing FinTech, which not everyone found funny. But it's a little bit a risk here.

It's good to hear this humor of the FSB. And I guess it makes a point, which is that we may have to look over the shoulder of the innovators, but we don't have to substitute the innovators. So I can tell you that there is a great deal of humility in these discussions. We want to learn from the market. We want to learn from market participants

where they're heading. Maybe in 10 years, it's not DLT anymore. It's something else. So maybe the whole question was futile anyway, because in 10 years, it's not called DLT anymore. It will be something else, DLT 2.0 or whatever it's called. So that process has to be led by the market, but we have regulatory principles.

We want to be sure that the way we do regulation is robust and is technology neutral. And so far, I have to say personally, I haven't found any evidence that the principles on which our standard setting approach and regulatory approach are based. So namely, in the case of financial market infrastructures that would be the PFMI's, I haven't found evidence that we would have to change the PFMI's.

But we have to understand how to implement the PFMI's to make them relevant to these new technologies. I would like to give the floor to the audience, but something we haven't mentioned is cyber risks, cyber threats, and we had a session on this

just before this panel. Is there anything you would like to say to it? And then we'll have five minutes or so to interact with the audience. Cora, please. Well, I think we had an excellent presentation, but I would just like to underline the importance of cyber security on top of our political agenda,

on top of, well, all of our agendas, because if you realize that 80% of all the data that we have now was created in the last two years, that is amazing. And the trend towards more artificial intelligence in combination with machine learning, it will continue.

It is growing very fast. And if you combine that with the internet of things, it is already happening, then you see an exponential use of data. And of course, we will have to answer a lot of questions around all these data flows. It's not just the storage. It's, well, I think, like many people say,

data is a new currency. That is becoming more and more important. And of course, then there is immediately the relation with the risk of protecting these data. People always say, I have nothing to hide, but everybody has a lot to protect. And that is what we have to fight for. Steven.

Maybe just a very, just a short remark is, I think what we, and it relates to the point, this needs to get priority. At the end of the day, in terms of priority, it sounds pretty dull. This is about internal controls, this is about IT systems, and really giving your attention to that, and both for the market participants,

but also as a regulator. And we are directly involved in credit rating agencies and trade repositories, which are massive data houses, also in the colleges for CCPs. And it means that in your day-to-day supervision, you need to give the right attention, but also that you're willing to act when you see problems in this area.

And I think there are some, sometimes there's a bit of this feeling at the end of the day, this is just about an administrative thing, this is about IT testing, and does this really warrants an enforcement and a fine, et cetera. But I think it also needs to take the priority from an enforcement perspective. And it means indeed, is that if you see sloppy IT preparation,

if you see that there's not sufficient IT expertise within the organization, is that you act upon it. And so at the end of the day, this is also just about work, and doing the regular work as a supervisor and enforcer. Yeah, and I just would like to take that opportunity to advertise the CPMI OSCO guidance on cyber resilience,

which came out a few months ago. And which the industry has to take very seriously. I mean, is taking very seriously actually, Simon? I was just gonna make another plea to consider break tech as well. So it's one thing to make sure that people are doing, have good hygiene. I think it's another one to provide opportunities

in terms of there are startups who could solve some of these cyber risk challenges and really bringing them in through the door more and more and seeing that as an opportunity. Again, the paracetamol for the industry bring in this innovation to help prevent cyber risk more and more. Do we have time for a few questions from the floor?

So let's take three questions. Please introduce yourself. And then whoever wants to answer on the panel will answer. Is there any, what is that, no questions is perfect, but no, no questions?

Xavier, yeah, please, of course. One additional comment, please, on cybersecurity. With big supporters of what the EU is doing and has done, the NIS, for example, Standard and many other initiatives, and what the regulators, the Bank of England, for example, has the CBES program. But cybersecurity for infrastructure is not an offense.

It's a defense game. So we're constantly on the back foot. We have to anticipate, we have to be proactive, but it's a proactive defense. And so if the regulators, together with the political decision makers, lawmakers, are sensitized to it, what we believe is really important

is that once the framework has been agreed, or of course the headline make it into the press, the actual inner workings of the cooperation between industry participants, and this cannot be, by the way, completely multilateral. This has to be closely coordinated with regulators, systemic regulators, conduct regulators, others,

security officers within governments. That has to remain very much under the radar screens. So while sometimes we come across well-intentioned initiatives, for example, asking any listed companies to go out and publish what they're doing in the space so as to develop a sense of resiliency,

robustness in practice, intuition is not always your best ally. As we've seen earlier in the presentation that was made on cybersecurity, sort of audiences' instinctive answers tend very often not to be the right place to start.

And I think the key here, again, is international cooperation. There's no such thing as nationally or domestically focused cyber attacks. There are state agents, there are what we call the business side of cyber crime, organized crime. They don't know borders.

And so we need to work the same. We need to work across infrastructure, regulators, systemic as well as conduct around the world. The rest need to be kept quiet in terms of what we do. May I ask the other speakers for their last words, last word of conclusion? I will give the floor last to Cora. I would offer respect for a democratic presentation

because at the end it's in your hands. Simon. Sure, so I think the argument for kind of more reg tech, more small companies and kind of little bit less centralization is not an argument against CSDs and it's definitely not an argument against integration. In fact, it's the opposite. We need more ability to communicate

in order to achieve those things and to allow more small players into the market to really take that difference. So as Xavier made the point that we need standardization, we need communication, but we also need to figure out how we let people through that door. I think that's kind of my key point. The thing I'd leave you with is that there's no such thing as the internet.

It doesn't exist. It's a figment of your imagination. There is a network of networks that use a very simple communication layer to be able to communicate. From that very simple idea, communication was revolutionized. Can we think in similar terms? Can we think of very simple ways to be able to communicate with each other

to actually achieve something amongst all of our disparate networks? The irony is we didn't create one big central server for the whole world. We actually connected up all of the servers that were already there with great communication. And I think events like this really help. Stephen? On the last point, obviously it is very important

like in any supervisor relationship between the regulator and the supervised entities that there's always this combination of the need for confidentiality and especially in the case of cyber risk where you know that there might be reluctance and there will be reluctance in some cases to share it with the regulator. Fully understand that there,

that needs to be bilateral. On the other hand, in some cases, if there's been substandard performance, I think you need to take your supervisory measures as expected. Going back to the opening remarks, again, I would really hope that there is progress in the financial sector in terms of more technology.

I truly believe that it can help in terms of making it more transparent, make it more simple, and also increase competitiveness. For example, through technology, we hope that we can have more transparency on costs. Very important to make it into a more competitive sector. So in that sense, as a regulator, very much embrace the idea of more technology

in the sector. Thank you. Go on. Well, usually it's when things get complicated, people look to politics as a soothing antidote for society's complications. And I think in, whether it's FinTech, RegTech, or InsurTech, we haven't talked about that very much, but it's also really, really important.

I want to stress the need for speed because we have to realize that in Europe, we have a big legacy. We have our IT systems, we have our regulation, and in some other parts of the world, they don't have that. So we start the game at one nail behind. So for that reason, we need to really work harder

and invest more in it. And I think that is what we need to do together because especially in politics, you can draft legislation and regulation to the extent you like, but it won't change a thing if the business and society doesn't take its part.

So I would be very much an advocate of the multi-stakeholder approach, and I would encourage you all to push all the new developments further. Thank you. Thank you. Thank you very much, Cora. I don't intend to wrap up the whole discussion. Just maybe as a conclusion to pick a few things

I learned from the discussion or I learned are important. First, I learned that the internet does not exist, but okay, I'm kidding. I think data has emerged as a very important conclusion of the discussion, and maybe it's a little bit overlooked in the official.

discussion, how much this will impact data production, the use of data, and how much global coordination on use of data is important. It has been a big workstream in the FSB. There might be legal changes, statutory changes needed in some jurisdictions if we want to use data to aggregate data in a proper way. So we will need a sense of global coordination

also on data, and FinTech will impact it very much. Second, the importance of global cooperation. I think we all agreed that, in particular, as we speak today in a, I'm not going to qualify it, but in what we can see as an uncertain political environment,

the sense of global cooperation on FinTech, on financial regulation more generally, is absolutely crucial also for the industry, for the security and the stability of the industry. So it is absolutely key that this sense of global cooperation is upheld, maintained,

and will be committed on the European side to work in that direction. And finally, speed. Speed. Speed is of the essence. And let me stop it here and hand it back to the organizers. Thank you very much. Thank you very much.

Benoit Courrée, members of the FSB.