Learning Objectives:

  • Identify emerging regulatory challenges in digital banking.

  • Understand future trends in banking regulation.

  • Explain the role of RegTech and SupTech.

8.1 Regulating Cryptocurrencies and Digital Assets

The regulation of cryptocurrencies and digital assets is a major emerging challenge. Key regulatory developments include:

  • EU Markets in Crypto-Assets Regulation (MiCA): Establishes uniform requirements for public offerings of crypto-assets, their admission to trading, and the provision of related services [citation:6,12].

  • Czech Financial Market Digitisation Act: Imposes significant obligations on individuals and entities involved in the crypto-asset sector, implementing MiCA [citation:6,10].

  • US Approach: The US is characterised by a fragmented regulatory system with competition between federal and state regulators, and contradictions in the regulation of the crypto market .

8.2 ESG and Sustainable Finance

Environmental, Social, and Governance (ESG) factors are gaining prominence in the banking industry on a global level . Key developments include:

  • EU CRR3 and CRD6: Introduce ESG considerations into capital requirements (also referred to as Basel IV ESG) .

  • Basel Committee Recognition: The BCBS has acknowledged the growing importance of ESG factors in the financial sector .

  • Investor Demands: Investor demands and societal expectations are driving banks to integrate ESG considerations into their business strategies and risk management frameworks .

8.3 RegTech and SupTech

RegTech (Regulatory Technology) and SupTech (Supervisory Technology) are important tools for managing digital risks and regulatory compliance .

RegTech: Technology used for automated compliance, including AML/KYC, regulatory reporting, and risk management. RegTech platforms can reduce reporting time by 90% .

SupTech: Technology used by supervisors for real-time supervision and risk monitoring .

8.4 Future Trends in Banking Regulation

Future regulatory challenges will focus on [citation:3,7,14]:

  • Operational Resilience: Ensuring firms can withstand cyber-attacks and IT failures. DORA in the EU and FFIEC guidelines in the US set the standard .

  • AI Governance: Balancing innovation with consumer protection and financial stability.

  • Geopolitical Risk: Navigating the impact of political tensions and trade problems between major economies .

  • Simplification: A growing call to simplify banking regulations, particularly those from Basel, to better align with modern liquidity management and faster financial transactions .

 

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