Over the past decade, there has been a surge in technological innovation, particularly within the financial services sector driven by financial Technology or fintech. Blockchain and distributed ledger technology have been key factors in this growth, resulting in new ways of raising finance, exchange for payment purposes, asset classes, and forms of Business. This innovation has presented challenges for regulators, leading to discussions on the principle of technology neutrality. Technology neutrality means that laws and regulations should not favor or discriminate against any particular technology. This principle has been justified on the grounds of future-proofing regulation, impartiality, and ensuring businesses with similar activities and risks are subject to the same rules.
However, there are concerns about whether the principle of technology neutrality should still apply given the unique nature of the current technological innovation. Some argue that sticking to technology neutrality has hindered the development of regulation and has compromised protection for consumers and investors. As a result, there are differing opinions on how regulation should respond to technological innovation, ranging from adapting existing regulation, defining technology and creating technology-specific regulation, to letting technology regulate itself.
The explosion of technology as a constitutive force in creating virtual assets and services, such as digital currencies, has called into question the logic of maintaining technology neutrality. Critics argue that technology neutrality has stifled innovation and favored existing systems. However, adherents argue that it preserves flexibility for businesses and allows for greater efficiency in compliance. These debates highlight the challenges faced by regulators in responding to the rapid pace of technological change and its impact on the financial services industry.
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