A Shift To KYD in RegTech.
The regulatory framework for finance is in need of rethinking. And RegTech 3.0 is our term for the future of RegTech. The FinTech sector is shifting its focus from the digitization of money to the monetization of data, making it necessary for new frameworks to accommodate new concepts, such as data sovereignty and algorithm supervision. A sequenced approach to the development of FinTech within a RegTech framework is necessary.
The primary barrier to RegTech’s development is not technological limitations but, rather, the ability of regulators to process the large volumes of data that the technology itself generates.67 Regulators need to adopt a coordinated approach that seeks to harmonize financial regulations and support the continued development of RegTech.
The new datacentricity underpinning the evolution of both FinTech and RegTech represents the early stages of a profound paradigm shift from a KYC approach to a KYD approach. As this shift unfolds, regulators must invest heavily in the development of proportionate, data-driven regulation in order to deal effectively with innovation without compromising their mandate. http://www.cfapubs.org/doi/full/10.2470/rfbr.v3.n4.1