Scotti: AI, crypto to reshape finance, regulators must adapt
Chiara Scotti, Deputy Governor of Banca d'Italia, highlighted the transformative impact of artificial intelligence and crypto-assets on financial markets. Speaking at the ASSIOM FOREX Annual Congress, she outlined three future scenarios and emphasized the need for regulators to balance innovation with financial stability.
Digitalization's dual impact
Deputy Governor Scotti opened her speech by acknowledging the profound transformation digitalization, encompassing distributed ledger technologies, crypto-assets, and artificial intelligence, is bringing to the financial system.
She identified emerging opportunities such as increased efficiency for intermediaries, improved customer services, and enhanced financial inclusion.
However, Scotti also underscored the mounting challenges, urging central banks and supervisory authorities to identify potential threats to sound management, overall financial stability, payment system functioning, and consumer protection.
The European Union's ongoing revision of the regulatory framework is crucial in addressing these complex issues.
Navigating future uncertainties
Scotti explored three interconnected mega-trends poised to revolutionize finance: the growing role of Big Techs in intermediation, the increased relevance of crypto-assets, and the promise of artificial intelligence.
She noted that these trends are amplified by factors like computing power for AI models and are influenced by geopolitical choices.
Recognizing the impossibility of precise predictions in such a volatile and interconnected environment, Scotti advocated for a systemic, medium-term approach.
This strategy aims to develop robust and flexible solutions capable of managing risks across various plausible future scenarios, rather than reacting to every immediate change.
Anticipating the unknown
The speech effectively uses hypothetical scenarios to frame complex future challenges, offering a robust framework for regulators to anticipate change.
While not predictive, this approach highlights critical vulnerabilities that central banks and supervisors must address proactively to foster innovation.
It underscores the necessity for flexible strategies and timely actions in a rapidly evolving digital financial landscape.