Paris Blockchain Week Summit (Part I) — Leading Financial Regulators Shed Light on the Universal Struggle to Regulate Cryptocurrency

Key Highlights

• From a regulatory standpoint, there is ample reason for governments and institutions to be interested in the cryptosphere. Giles Ward references how it stands to pose “investor protection and market integrity risks.” Marius Jurgilas, Board Member of the Bank of Lithuania, thinks about the potential for blockchain technology to be used in the Bank of Lithuania’s “internal processes as a central bank.” And Caroline Malcolm, Head of the Organisation for Economic Cooperation and Development (OECD)’s Blockchain Policy Centre, believes in regulation for the cryptocurrency industry’s own sake, as it confers a degree of certainty and security onto an ostensibly risky investment, and would allow crypto, as “a new type of asset class, to really scale and access traditional investor markets.”
• Given this interest, the thought process of those implementing technological regulation is described by Giles Ward, Senior Policy Advisor for International Organization of Securities Commissions (IOSCO), as divisible into four stages: ignorance, arrogance, humility, and utility. One starts with no knowledge of the novel technology, learns about its basics and acquires a premature arrogance, realizes the depth of the subject and what they are still ignorant of, and reconciles the whole thing to come to an understanding of the technology, its industry, and where to go from there. Ward reckons that the crypto sphere is in the latter stages.
• Mike Gill, Chief of Staff and Chief Operating Officer of the US Commodity Futures Trading Commission (CFTC), acknowledges that the US has been divided, if not reluctant, about how, if at all, to integrate ICOs into traditional markets. On the other hand, Europe has been more forward-looking, and Gill submits that while it is not in character for the US to “adopt somebody else’s rules… once somebody gets out there with a blueprint,  it makes it easier for us to start.”
• The panel concurs on the fact that they must achieve some sort of “harmonized approach” in order to prevent industry players from “jurisdiction shopping,” and undermining regulatory efforts through this arbitrage.

Listen to the podcast version

Looking back on the impact that Bitcoin and following crypto advancements had on the financial world, a panel of high-ranking financial regulators from intergovernmental organizations, US agencies, and European central banks discussed the challenges of regulation. Caroline Malcolm, Head of the Organisation for Economic Cooperation and Development (OECD)’s Blockchain Policy Centre, Giles Ward, Senior Policy Advisor for International Organization of Securities Commissions (IOSCO), Mike Gill, Chief of Staff and Chief Operating Officer of the US Commodity Futures Trading Commission (CFTC), and Marius Jurgilas, Board Member of the Bank of Lithuania, all congregated in Paris for its inaugural Blockchain Week Summit back in April. France hoped the event would bring together entrepreneurs, investors, and industry specialists to make it “the first G20 country to create a business-friendly environment for [blockchain’s] rapidly growing ecosystem.” 

The panelists discuss their roles as regulators in the space, touching on the need for oversight, concerns regarding its implementation, the process of learning regulators must go through to familiarize themselves with new technology, and the challenge of coordinating regulatory efforts across organizations and national borders. 

As Malcolm states, “there’s a realization that without providing regulatory certainty, the ability for this new type of asset class to really scale and access traditional investor markets is gonna be extremely difficult.” However, regulatory certainty is much more difficult to achieve when the product being regulated is, first of all, designed to be self-regulating and to depart from the “internalization and traditional structures of finance,” including its governing bodies, and second of all, entirely foreign to preconceived knowledge of how money works. 

Add to this the fact that different countries have vastly differing stances on the adoption of cryptocurrency, from Japan’s embrace of blockchain and its products to China’s skepticism and prohibition of its trading, and coordinating a consistent regulatory policy seems to be near impossible. Gill concurs – the fact that the United States itself has so many regulatory agencies with divergent attitudes towards blockchain is indicative of how hard it is to reach a consensus, even within just one country. However, Gill also points out that while “the US would be loath to adopt somebody else’s rules, but I think once somebody gets out there with a blueprint, it makes it easier for us to start.” Malcolm extrapolates on this conjecture, pointing out that “in the development of what we’ll call an international approach to different policy issues– that you see different countries start to try out different things which take into account their specific environment and their specific context and concerns… over time that helps organizations like the OECD work out how they might be able to help countries develop, what might be best practice taking into account for your specific circumstances.”

As a whole, the panel concluded that regardless of who takes the lead on adopting blockchain and implementing the relevant, necessary guidelines to ensure investor protection and market integrity, there must ultimately be a conversation, much like the one detailed below, about a common goal across borders: as Jurgilas says, “how to achieve multiple objectives with a limited amount of cost to the [crypto] industry.” 

Full Transcript

Merci, Jennifer, and merci everyone, for really giving us the platform to speak to you, and not just those of you here in the audience. By “you”, we are talking about a global audience, a global audience that are keen to understand blockchain technology, and its applications. You may be doing projects right now, you may be in the technology space, you are likely looking for future guidance.

I’m personally and professionally really thrilled to be here. So just a quick backstory. I am a former Bloomberg television anchor, based in Hong Kong. So I’m used to this gang of people here on this stage- I will tell you that having founded Forkast News, that the kind of professionalism that these folks provide here on this stage is really, really insightful and innovative. Some would argue needed, others would argue not, but that is exactly why this space is so interesting. So I will be your guide, I serve you; there may be an opportunity to also ask questions and really, this is going to be a conversation. But please help me welcome once again our esteemed panelists, Caroline Malcolm from OECD, Marius Jurgilas from Bank of Lithuania, Giles Ward of IOSCO, and Michael from the CFTC.

We’re here to talk about international regulatory cooperation for the development of financial innovation. That’s a lot of words for, how do current regulators around the world think about blockchain, and think about blockchain technology as it applies not only to their nations, but to their people.

We’ve got some of the leading agencies in the world on this stage and I will let each of them tell you about their organization and why they’re thinking about blockchain. Caroline, I’ll start with you. 

(Malcolm)

Thanks Angie, and thank you also to Paris Blockchain Week Summit for the invitation to be here. As you said, I lead the OECD’s Blockchain Policy Centre. We’re working across the policy spectrum, on issues relating to blockchain and other distributed ledger technology, and working to really ensure that there is a global reference point on the policy issues that arise in this space.

(Ward)

I’m Giles Ward, I work for IOSCO. IOSCO is an organization of 128 securities regulators from over 115 countries around the world. We have three objectives: to promote investor protection, market integrity, and financial stability risks, and we do this with two tools. First of all through the exchange of information both about policy, but also about enforcement, and secondly through the developmental promotion of common or consistent international standards. In terms of how we’re looking at the cryptosphere, we are playing the overarching approach of why, what and how. 

So first of all, we’re trying to identify why we should be interested in the cryptosphere. Broadly speaking, we are because we think it poses potentially investor protection and market integrity risks. In terms of “what”, we have been developing some thinking through various networks and a potential framework about how we think about what these assets are, and secondly, in terms of how we are also developing some thinking about what standards regulators around the world should be considering when they’re thinking about, in particular, trading platforms.

We’re trying to identify why we should be interested in the cryptosphere. Broadly speaking, we are because we think it poses potentially investor protection and market integrity risks.

(Mike)

My name is Mike Gill, I serve as a Chief of Staff and Chief Operating Officer of the Commodity Futures Trading Commission in the United States.

I joined the CFTC a couple years ago from the private sector and the chairman and I had this crazy idea to create an innovation startup within a government agency, and so we conceptualized this thing called Lab CFTC and most folks out in the investment space, we then hired smart people to actually run it. That lab was intended to help us understand artificial intelligence, a lot of the algorithmic trading that’s really the momentum in the market.

But also, not that we formed it for this, but it became our interaction with blockchain, and DLT in the crypto universe, and so it helped us get comfortable with licensing the first two swap execution facilities that would trade [Bitcoin]. We then licensed a clearing house that physically settled Bitcoin. And all through those steps, those were swaps, those were eligible contract participants, they were physically settled and it allowed us to learn and get a comfort level with Bitcoin to the point when CBOE and the CME came to us with their Bitcoin futures contract, which now is kind of yesterday’s news and not very exciting, but at the time it was not particularly popular in the US government, was not popular with many market participants; we actually got a lot of critical letters. We felt it was important to let innovation work – we worked with the exchanges on those two products. And in retrospect, I think it was a healthy thing for the marketplace to bring a federal role in United States to Bitcoin. And then we can talk more later about where that may evolve to.

(Jurgilas)

Hi, my name is Marius from Bank of Lithuania and I’m a board member for Bank of Lithuania, an integrated financial markets regulator, which in a human language means that we have the monetary policy authority, the guys who exchange money, dealing the payment systems. We have financial stability authority, which means that we supervise the banks and ensure that they’re prudent. We’re also the financial markets regulator, like my colleague, and we license entities who deal in financial markets, and we act as a semi-court if someone mis-behaves in misinforming investors on what they promise in their whitepaper and things like that.

So maybe that gives an introduction of why we care about blockchain and how we view that. Obviously blockchain could be used for multiple things, ranging from dissemination of information security, or maybe even distribution of cash. So as a central bank we’re very much interested in how that technology could be used in our internal processes as a central bank. One being, distribution of cash and issuing of currency. And I’ll talk about that probably later. 

So as a central bank we’re very much interested in how that technology could be used in our internal processes as a central bank… And the second one is, as a supervisory authority, we want to understand what is happening on the ground. And the reason why I have been walking around here and talking to people is to understand what exactly is happening and what schemes and ways of implementing new innovative technologies are being developed right now.

So how do we do that? We bring the industry into the house. And the best way to do that is to allow them to develop financial products together with a regulator.

And the second one is, as a supervisory authority, we want to understand what is happening on the ground. And the reason why I have been walking around here and talking to people is to understand what exactly is happening and what schemes and ways of implementing new innovative technologies are being developed right now. So how do we do that? We bring the industry into the house. And the best way to do that is to allow them to develop financial products together with a regulator. And I’ll talk about that later as well.

So, I’m gonna address the elephant in the room, which is when we talk about blockchain, and crypto currency, and really why Bitcoin came into existence, it really was a reaction, I think, to the standard of the internalization and the traditional structures of finance; it was an alternative.

And so the question is, is this intellectually and philosophically something that is good for Bitcoin, cryptocurrency alternatives, assets, blockchain? As professionals on this stage, thinking about it from a regulatory point of view, is this something that we… and by we, I mean you, should even be doing? 

(Mike)

You mean in terms of sort of giving our blessing to mainstreaming it with regulation?

Being in this space. 

(Mike)

So since we already have, I think it’s a brilliant idea. That’s the dilemma we faced in the fall of 2017, was: we’ve been working with the exchanges on whether or not… you know, let me step back a second and put in the disclaimer that these are my views, not those of the agency or the commissioners, before I start telling you what I think and get my agency and trouble. In the fall of 2017, there was a very large blockchain community, Bitcoin was getting very popular for a couple of years, about every law firm in the earth suddenly had a blockchain practice, even though most of them didn’t know what the law was, or why they needed a practice. I was included in that.

And in the US government, you had sort of a… this is nothing. Why would we even want this to have any status? But through Lab CFTC and through meeting with the various people in the community… what made us feel comfortable with this was stepping out of our US dollar-centric world and thinking about other parts of the planet, where the currency is not stable. We use the example, one of the market participants came in and talked about in Sierra Leone, if you want to go to the grocery store you use the local currency, if you want to pay landscaping you use the local currency, but if you want to buy a car you’ve got to use dollars or euros. And so that’s the type of person that would appreciate having a decentralized mechanism for payments.

So Bitcoin didn’t quite evolve into that, but that impressed upon us that this wasn’t just the tool of mania. That there was something behind all this, and it wasn’t our job to say “this is good or bad”, it was our job to look at it and say, “Could this be manipulated, could this be used to defraud someone?” And once we put our metrics of how you handle derivatives regulation on top of the cash markets… and we can talk about that as we get into the future, but we did layer some extra asks (requests). We couldn’t force them to do it because it wasn’t in the statute or regs but we requested the exchanges to put some additional safeguards in.

The US financial markets are large, complex, and successful because of innovation. So there’s been over, I think we counted 12,000 different types of futures contracts that have been introduced on the exchanges since 2004. Most of them last, not very long. They don’t get any liquidity and they go away, but people throw things up on the wall and see if it sticks.

This was eap because it wasn’t popular with other parts of the government at the time but we felt comfortable that we could manage the derivative aspect of it.

(Malcolm)

I think there’s also a different angle, which is that of industry, and I think what we’re hearing is that there is a lot of demand for regulators to step into this space because I think there’s a realization that without providing regulatory certainty, the ability for this new type of asset class to really scale and access traditional investor markets is gonna be extremely difficult. You’re just simply not gonna get the volume that you might otherwise get if you don’t have certainty about what the regulators will do, because the regulators are clearly watching this space. And I think that also ties in with the second part of your question Angie, which is the genesis of this industry and the fact that you still have a lot of players in this industry, who do have a sort of anti-establishment mindset, and I think that’s why taking a multi-stakeholder approach to the development of the regulatory environment is actually really critical.

There is a lot of demand for regulators to step into this space because I think there’s a realization that without providing regulatory certainty, the ability for this new type of asset class to really scale and access traditional investor markets is going to be extremely difficult… 

the genesis of this industry and the fact that you still have a lot of players in this industry, who do have a sort of anti-establishment mindset, and I think that’s why taking a multi-stakeholder approach to the development of the regulatory environment is actually really critical.

Because without that… And we know because of the nature of the technology itself, regulation alone is probably not going to cut it. You’re also gonna need market norms, you’re gonna need other influences in the market to really regulate technology, particularly if we see an evolution towards more decentralized, autonomous organizations, permissionless blockchains, they will be able to move out of the regulatory framework. And so without having a common understanding about why some of those things that might talk about are important, they won’t be integrated in that non-traditional space as well.

(Jurgilas)

If I could come back to the original question, why Bitcoin, why cryptocurrencies? And I’ll talk about crypto assets later.

Usually then, you have people on the stage and they say what kind of products that they’re selling. ‘We are selling a product here, you know what product we sell? Anyone? It’s called trust. As a regulator, as a standard-setting body, as a monetary authority, we are selling trust. And if you trust us, there will not be any conference like this. So if something happened back then… in the epicenter of the financial crisis some stories started coming and people started throwing ideas around that maybe we can do better, and that remains still to be seen.

So my point is that if regulators monitor authorities, start selling the product better, if trust is being restored, there won’t be any need to talk about a distributed way of doing anything. Maybe we can, as regulators, do that job by ourselves.

And now, coming back to this point of crypto assets: so the point that cryptocurrencies can replace the currency being issued by the central bank is not being debated right now. Probably at some point, probably in China, the guys who invented cash will invent digital cash, they’ll roll it out somewhere in the corner of the country, and we will not even notice it for 10 years and they’ll say “we have been testing this for 10 years”, and that will become the new standard. But in terms of crypto assets, that’s a very interesting proposition because it allows in some places of the world, where capital markets are not that well developed like in the United States, where there is no venture capital community like in Silicon Valley, to attract risk-loving individuals in a proper way without pump-and-dump schemes and mis-informing investors into productive yet very risky activity, and maybe that’s what we should be cooperating on and implementing.

Well, I thank you for those very candid answers. Is there going to be one country, or one organization that is going to lead the way? Because you said something that is very critical, Caroline, it’s that the fact that there is this search for guidance from the regulatory bodies, but what we are all experiencing is that the regulatory bodies from states, federal, nationhoods, to international organizations, are still trying to figure it out as well. Where is this evolving to, or converging into? Where will we get to a place of standardization, or will we ever get there? 

(Ward)

Well, as you said, I think there’s two questions that you’ve put out there. First of all the demand for regulation, possibly from industry, and secondly, the ability of regulators to supply that regulatory certainty. In terms of the demand, as you say, at the outset there’s very little demand for regulation, but once people start becoming more established, they see that the benefits that come from the establishment of trust and so forth. 

And secondly, they also understand the mutuality of a lot of regulation– that a lot of regulation applies to the critical gate-keeper or the critical central function. And there’s a sort of mutuality there in terms of industry assuming that gatekeeper function.

Now from the regulatory perspective I think it’s always worth bearing in mind that there’s perhaps four stages of technological regulation, the regulators need to go through: ignorance, arrogance, humility, utility. When a new product or new technology pops up on the scene the first question regulators ask is, “What the hell is this?” They then obviously go out, start asking questions, and then they tend to assume they are the experts in this area, simply because they know more about crypto than the insurance supervision department.

There’s a third stage where it turns out that either, when they start pressing deeper the questions actually get more complex, or else what often happens in simply the forecast or trends that they made their assumptions on turn out not to be the case.

And we then get to the humility stage. And finally, we’d like to say at the end of the road we have a utility stage where regulators understand roughly where we are with the thing, and what can be done and what can’t be done.

There’s perhaps four stages of technological regulation, the regulators need to go through: ignorance, arrogance, humility, utility. When a new product or new technology pops up on the scene the first question regulators ask is, “What the hell is this?” They then obviously go out, start asking questions, and then they tend to assume they are the experts in this area, simply because they know more about crypto than the insurance supervision department.

There’s a third stage where it turns out that either, when they start pressing deeper the questions actually get more complex, or else what often happens in simply the forecast or trends that they made their assumptions on turn out not to be the case. And we then get to the humility stage. And finally, we’d like to say at the end of the road we have a utility stage where regulators understand roughly where we are with the thing, and what can be done and what can’t be done.

I’d like to say we’re probably now in stage three or four at least in the main [blockchain] communities.

I’d like to say we’re probably now in stage three or four at least in the main communities. But as I say, this is why I follow this approach, although it seems sort of quite talkative… The first stages, making sure that everyone is on the same page in terms of their information. So we do an awful lot of information exchange through things like the ICO network, the Fintech network, through board meetings and so forth. Because if you’re gonna develop a consistent one country solution, then everyone’s gotta be on the same page in terms of that regulatory cycle because otherwise, if everyone’s in the arrogant stage, then everyone’s got the incentive to just run off and do what they think is the best thing.

Right now that one country seems to be the United States. 

(Mike)

Oh, I was just about to jump in and object, but I will jump for you. I don’t think so. 

We are all over the map right now in the United States. The ICO issue took up all the bandwidth of the regulatory agencies in the United States. The Securities and Exchange Commission, our sister agency that regulates securities was not comfortable with the way ICOS rolled out, they didn’t see an innovative capital raising campaign, they saw fraud, fraud, fraud. The Federal Reserve has been lukewarm, because they deemed that Bitcoin itself and the other cryptocurrencies… and this has been a number of work streams on crypto, that have stocks, the Federal Reserve said it doesn’t affect the dollar therefore our interest is much lower. Our OCC has been really innovative, they’ve licensed some lending institutions, sort of non-bank charters– that has gotten them the wrath of New York and some of the states where traditionally those types of activities are held. 

We are all over the map right now in the United States. The ICO issue took up all the bandwidth of the regulatory agencies in the United States. The Securities and Exchange Commission, our sister agency that regulates securities was not comfortable with the way ICOS rolled out, they didn’t see an innovative capital raising campaign, they saw fraud, fraud, fraud. The Federal Reserve has been lukewarm…

Our OCC has been really innovative, they’ve licensed some lending institutions, sort of non-bank charters… And we are very pro-innovation in this space.

I think Europe has stepped forward and where we were thinking about this industry and where it may go. So, I think it’s helpful and I think the US would be loath to adopt somebody else’s rules, but I think once somebody gets out there with a blueprint, it makes it easier for us to start.

And we are very pro-innovation in this space and we have been pushing on Ether and we did our Ether RFI, but without a cohesive, “here’s where we stand”, I think when we make a decision, yes, we’re gonna bring a lot of cards to the table.

But the Chairman of the CFTC just gave a speech for Euro Fi, and I put some lines in there where I said, “Call out Switzerland and call out France because they’ve actually leaned forward and put some things on paper that we can’t say we would totally agree with, perhaps. But it’s something to work from and they’ve actually, they’ve now allowed these companies to show up and get some clarity and I think through…

From a broad level… because what you’re saying is that all of these critical agencies internally, in the United States are very fragmented. 

(Mike)

Ask anyone who’s ever had to deal with the US financial regulatory. They will say the one thing that drives them crazy, is how many agencies there are. We like to think we’re all perfect experts in our space, but it is madness. I think Europe has stepped forward and where we were thinking about this industry and where it may go, (I think industry is probably a bad term), but where this innovation will go… Two years ago, I think Europe was more skeptical. When I was presenting at IOSCO and talking about the swap execution facility that we had just licensed and how we were comfortable with it, because the clearing was gonna be physically settled, there wasn’t a lot of margin or any margin to deal with. And the looks from… We sit, I think it’s alphabetically, but I’m always across from France and Germany and they both… “What are you doing?” But here we are, two years later. And I feel there’s a real comfort level in France for this innovation and what’s the clarity that people need and how can we get it. So, I think it’s helpful and I think the US would be loath to adopt somebody else’s rules, but I think once somebody gets out there with a blueprint, it makes it easier for us to start. Alright, let’s argue about what’s on paper rather than just everything in the universe.

(Malcolm)

I think Mike makes a very good point, there. Looking from the OECD, a very international perspective, not just at Europe or America but really across the globe, seeing the start of different regulatory approaches develop is, if we look at other areas and I don’t think blockchain or blockchain in the financial services space is unique in this regard. That’s typically what we’ve seen in the development of what we’ll call an international approach to different policy issues– that you see different countries start to try out different things which take into account their specific environment and their specific context and concerns, and over time that helps organizations like the OECD work out how they might be able to help countries develop, what might be best practice taking into account for your specific circumstances.

I think one very important thing that regulators have in common, is that regardless of which jurisdiction you’re working in, what you don’t want to see is when you take a regulatory step is being undercut and having that regulatory arbitrage where industry players are looking to “jurisdiction shop” in a sense and undermine what you’re trying to achieve in your jurisdiction. And I think that’s where you start to see this interest in having a conversation between regulators to make sure that no matter which approach we’ve all decided to take for particular reasons, whether that develops into a harmonized approach over time, but at least that there is coherency between those approaches. So you don’t have that arbitrage.

regardless of which jurisdiction you’re working in, what you don’t want to see is when you take a regulatory step is being undercut and having that regulatory arbitrage where industry players are looking to “jurisdiction shop” in a sense and undermine what you’re trying to achieve in your jurisdiction.

And I think that’s where you start to see this interest in having a conversation between regulators to make sure that no matter which approach we’ve all decided to take for particular reasons, whether that develops into a harmonized approach over time, but at least that there is coherency between those approaches.

You’ll always have that, I think. And to your point Marius– you being the central bank of Lithuania and being that monetary authority, you’re providing a product as you said. It’s not necessarily just about trust, which of course it is, it is also access to markets. And for Lithuania it is an incredible access gateway to the EU and also recently making headlines that Lithuania is seeking out Chinese Fintech companies to work partnership, and perhaps align with business interests, and provide that gateway and entry into a broader European market. So is this jurisdiction shopping? Is this gonna be unique in of yourself, or is their consultation? Is there truly international co-operation here in your view? 25:55

(Jurgilas)

Very deep question. So, Michael, you are worried for no reason. I think the US is the global standard setting body specifically in this space, and more broadly speaking, in financial infrastructure space. And that’s what probably you want me to talk about. And the bigger elephant in the room, which I’m not sure I want to address, let’s say how it goes. It’s called geopolitics.

You mentioned China. I’m sitting next to our strategic partners from a national security perspective. It’s a very touchy subject, but, once finance starts being used for that type of activity, then all of a sudden new initiatives arise. If you start using SWIFT messaging for inclusion or exclusion of countries, ripple comes about and other new ways of exchanging messages, surpassing the watchful eye of the State Department, emerge.

So I’m not saying this is good or bad, I’m just saying what is the driving force of some innovation. And we cannot escape this elephant in the room, we need to understand which are the driving forces behind that process. And we need to balance the initiatives behind and make sure that regulators are not just making sure that the structures are bulletproof from a cyber security perspective, because you know what? The technology has been around for many years. If you really want to make it secure, there’s a very easy way to do that.

But the most important thing, and the title of this session is here called cooperation. Regulatory cooperation. It’s very difficult to achieve because the cooperation is not being led by the regulators, but by the higher level initiatives.

Regulatory cooperation. It’s very difficult to achieve because the cooperation is not being led by the regulators, but by the higher level initiatives.

(Ward)

Yeah, I think of the quick two questions that you ask are quite highly related. First, in relation to the one country issue– we’ve done over the years an awful lot of work on regulatory fragmentation. And I remember when we went up the chair of our board published the last cross-border task force report, he identified the main impediment to achieving consistency as being pre-existing standards. Now, obviously, in this technological area, it’s very much a green field piece of regulation, and so there’s perhaps less excuse for jurisdictions just for their own idiosyncratic reasons adopt different approaches. And so you would have thought that in this area, that if someone does come out with an approach that makes sense and is transferable to other jurisdictions that the sensible approach would be to do it that way, and that’s actually related to the shopping issue.

I mean, prima facie you’d say that regulators tend to be against jurisdiction shopping in the pejorative word, but we’re in Paris, so how can we be against shopping?

But secondly, our experience from the committees is that shopping is actually quite a useful exercise, because a lot of people go out, they’re looking to set up their businesses, they have to do a presentation in different countries or approach a regulator. To do that, they have to hire a law firm, and you know some of the experience we get is they get quite tired if every single time they’ve gotta have a different law firm do their pitch in a completely different way, redefine what they’re actually doing. And so that process actually creates, as you’ve explained, A. The interaction between the regulatory authorities and industry, but also an understanding that, at least on the basics, if we have a common terms or common standards, it makes it easier to go out shopping.

(Jurgilas)

Can I comment on this? It’s not that the driving force is the regulatory shopping, which is driving the response from regulators in all the regulatory arbitrage.

I truly believe that different regulators have different circumstances that they’re trying to address. If in Germany, they are solving the issue of the excess capacity of the banking industry and the consolidation of that capacity… in some other corners of Europe we have a lack of competition in the market entry. I’m speaking of myself, right? If our US colleagues are worried about the global financial system, which predominantly is based on US dollars being used for bad purposes, and that’s a very legitimate reason. They have that objective at the top of their mind. And different regulatory objectives result, as you can say in different frameworks, but we have ways in economics to maximize a function based on multiple objectives. And maybe that’s what we, a supranational forum, should be talking about, and that’s what we are talking about. How to achieve multiple objectives with a limited amount of cost to the industry. 

Different regulators have different circumstances that they’re trying to address. If in Germany, they are solving the issue of the excess capacity of the banking industry and the consolidation of that capacity… in some other corners of Europe we have a lack of competition in the market entry.

I’m speaking of myself, right? If our US colleagues are worried about the global financial system, which predominantly is based on US dollars being used for bad purposes, and that’s a very legitimate reason. They have that objective at the top of their mind.

And different regulatory objectives result, as you can say in different frameworks, but we have ways in economics to maximize a function based on multiple objectives. And maybe that’s what we, a supranational forum, should be talking about, and that’s what we are talking about. How to achieve multiple objectives with a limited amount of cost to the industry.

And that ultimately is… well, I really applaud each and every one of you for spending time with all of us and really engaging so thoughtfully, candidly and we know how busy all of you truly are. So to know that these conversations continue not only just on this stage, but also with the guidance of many of those in the audience, because this is a global conversation that is still evolving from the regulatory side and from the innovative side, but I think that when folks like you are also thinking innovatively I think we are all in good hands together. So please, a round of applause for our panelists, and thank you everybody.