Digital assets are one of the most significant recent developments in the financial services industry and will shape its future Digital assets such as crypto-assets, stablecoins and decentralised finance (DeFi) have grown exponentially. Increased interest and investment by traditional financial sector players and institutional investors, coupled with increased supply of products and services providing access to crypto-asset risk, are transforming business models and risk profiles of traditional finance (TradFi). Growing participation of institutional investors in digital asset markets can give rise to risks for investors at the micro-level and may also create channels of risk transmission between decentralised finance and traditional finance.

Given the multitude of potential risks in the growing markets for crypto-assets and DeFi, policy makers need to monitor  and evaluate these risks and consider policy actions to address them.

The OECD monitors the evolution of the market for digital assets and assesses potential channels of risk transmission to traditional finance. 

The growing institutionalisation of digital assets and the increasing integration of decentralised finance with the conventional financial system could bring a number of benefits  for financial markets and market participants

They could impact traditional financial markets not only in terms of efficiencies, but also through stronger competition, lower transaction costs and reduced counterparty.

The OECD monitors the rapid evolution of digital finance and identifies emerging trends that merit the attention of policy makers given the speed  of change.

By promoting and encouraging investor protection disclosures, policy makers can help mitigate the risks stemming from holding crypto-assets and participating in DeFi. Regulating and supervising digital finance activities requires co-operation and co-ordination both nationally and internationally  Oversight and regulatory compliance may be challenging due to the global nature of some digital finance operations, often without a defined home jurisdiction. Collaboration between supervisory authorities can facilitate enforcement and oversight across multiple jurisdictions.

Much of the crypto-asset activity takes place outside regulatory perimeters or non-compliantly, especially in parts of DeFi with centralised characteristics. Regulators should offer clarity on regulatory frameworks for crypto-assets and decentralised finance, providing guidance on addressing policy gaps. A comprehensive review of existing regulatory tools can help identify gaps and guide policy makers in taking appropriate action to mitigate emerging risks.

The OECD Recommendation on Blockchain and Other Distributed Ledger Technology lays out key elements in establishing or implementing policy responses to blockchain-based innovation.

There were more than 100 Czech FinTech companies operating in Czechia when the mapping report of the Czech FinTech ecosystem was prepared, active across a number of regulated and unregulated sectors of activity. The most represented areas in terms of number of companies are accounting, payments, savings and personal finance, P2P lending and investment crowdfunding. Many Czech FinTechs provide services similar to other globally successful FinTechs (e.g., “buy now, pay later”) services and most of them having data at the core of their business model.

The 2022-23 project constituted a collaboration between the European Commission, with the OECD as implementing partner, supported the Ministry of Finance of Czechia, in defining policy options for the establishment of a regulatory sandbox for innovative companies in the financial sector (FinTech). The general objective of this project was to contribute to institutional, administrative, and growth-sustaining structural reforms in Czechia to support the Czech FinTech ecosystem.

Throughout the project, two in-person conferences and two virtual conferences were held. The final report provided design recommendations for a feasible regulatory sandbox to support FinTech innovation in the Czech Republic.

The Asian region is home to the highest number of online internet users, who are the demographic most keen to adapt new technologies and most comfortable with using cashless payments, crypto-assets, and digital financial services. At the same time, parts of the Asian region remain unbanked or underbanked. The rapidly growing digital innovation in finance has allowed citizens of all countries to enjoy greater accessibility to financial products and services, unlocked, for example, through smartphone applications. This underlines the significant potential that the digitalisation of financial services could have with respect to financial development and financial inclusion in such parts of Asia, and beyond.  

The initial analysis of digital finance in Asia examined FinTech applications and use cases in the Asian region and provided an overview of the most recent and prominent digital innovations in finance as of mid-2021. It reviewed policy tools used by jurisdictions in the region, and suggests policy responses intended to support financial innovation while ensuring that the use of such mechanisms is consistent with promoting financial stability, market integrity and competition, while protecting financial consumers.

Following up on this analysis, a project on DeFi and FinTech in ASEAN in 2022-24 analysed the limits of decentralised finance for financial inclusion, drawing from the experience of ASEAN member states. Decentralised finance, including crypto-asset markets and DeFi protocol activity, has been promoted as a tool to support the democratisation of finance. The analysis presents quantitative evidence from ASEAN economies that participation in decentralised finance markets has been largely driven by speculative forces and a fear of missing out, rather than by practical use-cases that can promote financial inclusion.