Central banks “should change regulated ways” to regulate the FinTech industry

Banking and financial regulators must change the “regulated ways” in which the FinTech industry is governed to allow growth in the sector, the governor of Bahrain’s central bank has said.

Regulators should upgrade their frameworks and rulebooks not only to facilitate the expansion of the FinTech industry but also to maintain proper oversight of the sector, Rasheed Al Maraj told delegates at the Dubai FinTech Summit on Tuesday.

Bahrain’s central bank began looking at FinTech industry regulations back in 2017, and since then “we have developed our regulatory framework and developed our regulations”, Al Maraj said.

The CBB sees its role as “an enabler”, but as much as it wants to be “flexible, progressive and forward-looking”, the regulator wants to maintain comprehensive oversight: “the common concerns of all regulators, which are good corporate governance, proper risk management , compliance and consumer protection, Al Maraj said.

“I hope that the industry will understand, no matter how accommodating we are, that these values ​​are at the back of our minds.”

To achieve credibility, the wider industry should adhere to these values ​​locally, regionally and internationally, he added.

The FinTech sector has grown rapidly in recent years, especially during the pandemic, as consumers turned to online financial services and payment solutions.

The global FinTech market is expected to grow at a compound annual rate of 11.9 percent between 2022 and 2027 to more than $266.9 billion by 2027, according to a report by Expert Market Research.

FinTech startups led in both funding and number of deals in the Middle East, Africa, Pakistan and Turkey region last year, according to data platform Magnitt. The sector’s funding reached $2.25 billion across 351 deals in 2022.

Development of the FinTech sector is among the central planks of the economic diversification agenda of the governments of the six-member GCC economic bloc.

Regional central banks and financial centres, including the Dubai International Financial Center and Abu Dhabi Global Market in the UAE, run their separate FinTech programs and are also continuously developing their regulatory frameworks governing digital assets and the FinTech sector to reduce risk and protect consumers.

Al Maraj said there are differing views among regulators globally on how to regulate the industry and virtual assets.

However, the industry can help regulators by following the basics, including corporate governance, the role of the board of directors, the role of management and following good business practices to avoid problems that the crypto industry has faced in recent times, the governor said.

“I hope that the industry and those involved in this will rise to appreciate that proper conduct, proper governance and compliance will help them sustain their business,” he added.

Updated: 10 May 2023 at 03.30