New technologies are being introduced in markets around the globe. Disruptive innovations such as blockchain, cryptocurrencies, the Internet of things, automated cars and other products that support decision-making based on artificial intelligence (AI) are offering a creative take on traditional markets. Yet these technologies frequently require regulatory intervention to protect consumers or prevent systemic risks. One of the main challenges for regulating new technologies is insufficient technological knowledge by the regulators. The industry is invariably more informed about the subject matter than the regulators and is more likely to tailor regulation by private ordering. In these circumstances, we argue, “nudge” … Read more
Cryptocurrencies like Ether, DAO, Bitcoin and Facebook’s Libra are electronically generated and stored currencies by which users can trade real or virtual objects with one another, bypassing traditional central clearinghouses. Given that these cryptocurrencies are starting to replace some national currencies and financial products, should they be regulated? And, if so, how? Some countries, such as China and Russia, prohibit Initial Coin Offerings (ICOs) altogether, while others strive to reach an understanding of the currencies in order to come up with coherent regulation. As for the U.S., in April 2019 the Securities and Exchange Commission (SEC) finally issued its framework … Read more
Financial regulatory institutions are at the center of intense debates over how to supervise financial firms and markets. They are also the focus of an important and growing body of literature that is mainly concerned with the question, “Who should regulate the regulators.” Financial regulatory institutions are usually audited as part of the review of a particular country by international organizations such as the International Monetary Fund, the World Bank, or the OECD. In practice, this means that the structure of financial regulatory institutions and the conduct of financial regulators are not regularly and consistently monitored.
In our recent … Read more