Regulators are seeking to understand the impacts of technology for the industry. They want to facilitate innovation, but are also focused on identifying and mitigating risks.

Both Fin Tech and Big Tech receive multiple references in recent regulatory outputs, along with artificial intelligence (AI) and machine learning (ML). Distributed ledger technology (DLT) underpins crypto-assets but is also being put to good use in market infrastructure initiatives, including fund unit tokenization and settlement. Regulators are cognizant of the greater use by investors of social media and online platforms, but recognize the risks as well as the potential benefits.

See below for more detail on the key themes

Regulators are collaborating with industry and technology providers to gain a better understanding of the opportunities from and the risks of digital transformation in the industry, to firms and investors. 

In Saudi Arabia, the Capital Market Authority (CMA) held a forum in December 2022 to discuss digital transformation in the industry and its role in bringing increased foreign investment to the domestic capital markets. The CMA's FinTech lab is in its sixth year, and there is a push to encourage greater innovation in the fund management industry.

The UK FCA1 has created a permanent Digital Sandbox service to support a broader range of innovators, and established an Innovation Advisory Group, which is a regular forum for the FinTech and RegTech sector and the FCA to discuss issues and opportunities. The FCA's consultation on the future regulation of the UK asset management industry includes consideration of areas where technology could be used to improve customer experience and efficiency. However, the FCA also sought views on the potential harms (as well as the benefits) that may arise from Big Tech firms' entry and expansion into retail financial services sectors. It noted that Big Techs' entry could “benefit many consumers”, but also that their entry to the market may not be sequential or predictable, and there is a risk that competition could be harmed in the long term. 

The Monetary Authority of Singapore looks to its fintech collaborations to address five core issues:

  • Instant remittance: cross-border payments to flow seamlessly.
  • Atomic settlement: the simultaneous exchange of two assets in real time.
  • Programmable money: discouraging retail investment in cryptocurrencies but facilitating other forms.
  • Tokenised assets: using a software program to represent the ownership rights over any item of value as a digital token or asset.
  • Trusted sustainability data: FinTech could be a key enabler in resolving data challenges.

The Asset Management Association of China issued measures to regulate and promote the practice of electronic contracts in the private fund industry. The industry had been dominated by paper contracts, which are inefficient and prone to tampering. The measures cover custodians performing investment supervision functions, fund distribution agencies implementing the investor suitability requirements, and fund unit registration agencies registering the ownership of fund units. They are expected to facilitate the use of technology in supervision, and promote development of the private fund industry.

Providers of electronic transactions and trust services in the UAE are also subject to new measures. A new law, which came into force in June 2023, aims to increase certainty and protect users by regulating electronic documents and digital signatures.

A few jurisdictions had already permitted certain types of funds to invest in crypto-assets (see Chapter 8), but market events in the early part of 2023 caused regulatory concern and reflection, and many regulators increased their monitoring activities and investor protection safeguards (see Chapter 6). 

The FSB has finalized a framework for the international regulation of crypto-asset activities, to promote a consistent and comprehensive approach to overseeing crypto-asset activities and markets, and global “stablecoin” arrangements. Its starting point is that where the risks and activities are the same, crypto and “traditional” activities should be subject to equivalent regulation. Following feedback, the FSB strengthened the recommendations around safeguarding client assets and managing conflicts of interest. In May 2023, IOSCO also consulted on policy recommendations for activities performed by crypto-asset service providers. 

The movement to regulate crypto-assets continues at national level with regulators at different stages of implementing frameworks. Notably, the EU Markets in Crypto-assets Regulation (MiCA) will start to apply in July 2024. 


Regulators recognize that DLT has many uses beyond crypto-assets. Its benefits can include greater efficiency, faster transaction speed and lower overall costs in capital markets operations. DLT has been used to tokenize traditional financial instruments such as bonds, and pilot programs are now exploring the potential of tokenizing assets such as real estate. Regulators are exploring whether existing regulation needs to be amended to support the use of DLT through sandboxes and pilot regimes.

The new EU DLT Pilot Regulation, which applied from March 2023, provides a legal framework for the trading and settlement of transactions on DLT of assets that qualify as MiFID2 financial instruments — tokenized securities. Certain types of DLT trading and settlement systems will benefit from exemptions from the obligations applied under other EU laws that are deemed too restrictive in a DLT context.

Meanwhile, the UK government is consulting on its proposed approach for a Digital Securities Sandbox, which will enable firms to set up and operate financial market infrastructure, under a framework temporarily modified to accommodate digital asset technology. The activities will relate to existing security classes, which could be either digitally native issuances or digital representations of existing securities.

While several stock exchanges over the past years have established procedures for a digital asset offering, Switzerland's SIX Digital Exchange was the first regulated financial market infrastructure to offer a fully integrated end-to-end trading, settlement, and custody service for digital assets. It further enables the tokenization of existing securities and non-bankable assets.

Luxembourg has also led innovation in this area, with initiatives using DLT for fund settlement mentioned in previous editions of this report. Recent developments enabled by Luxembourg's legal framework, which covers the full DLT/tokenization value chain, include:

  • A digital bond listed on the Luxembourg Stock Exchange issued by the European Investment Bank (EIB) — the first euro-denominated digital bond to use private DLT.

  • A sterling-denominated all-digital bond issued subsequently by the EIB and held on a platform that uses private DLT to serve as legal proof to determine who holds the securities, and a public DLT to provide anonymous tracing of the chain of ownership.

  • A decentralized finance lending platform tokenized USD 100 million of bonds using a recognized security token standard.

  • A range of other initiatives, such as cryptocurrency services, use of non-fungible tokens to invest in prestigious wine, and tokenization of gold, other commodities and real estate.


Elsewhere, the MAS is working with industry in Singapore to explore the potential of DLT, and to facilitate the tokenization of financial and real economy assets. In Hong Kong (SAR), China, fund tokenization is not presently allowed, but the regulator is open to discussions. And the UK regulator has consulted on the tokenization of portfolio assets and fund units.


The use of AI and ML in finance is under scrutiny from regulators. They see potential in the automation and personalization that AI can offer to financial services but are closely monitoring potential risks. Further to IOSCO's September 2021 guidance on the regulation and supervision of the use of such technologies by market intermediaries and asset managers, various regional and national regulators have issued reports and are collaborating with technology providers.

In February 2023, ESMA3 issued a report on the use of AI in EU securities markets, which noted that an increasing number of managers leverage AI in investment strategies, risk management and compliance, but only a few have developed a fully AI-based investment process and publicly promote their use of AI. The report identified that a key risk with increased uptake of such technologies is the concentration of systems and models among a few big players. 

The report also noted that many of the issues associated with financial institutions' use of AI are similar to those posed by traditional models, but the scale at which AI can be used, the speed at which AI systems operate and the complexity of the underlying models may pose challenges to firms and supervisors. Therefore, many regulators are in the early stages of developing AI-specific governance principles or guidance for firms.

The Central Bank of Luxembourg and the CSSF4 reported in May 2023 on a survey conducted during the period October 2021 to January 2022. They found the overall level of adoption of AI in the Luxembourg financial sector to be limited at that time (only 30 percent of surveyed institutions used AI technologies, with ML being the main technology used), but that investments in the technologies were expected to grow. The authorities found that firms were aware of the specific risks related to this technology and referred to the recommendations in the 2018 CSSF white paper, while waiting for harmonized EU rules on AI. 

A new EU AI regulation has entered the final negotiation stage between the co-legislators. It takes a prescriptive approach, including prohibited practices, various governance, organizational and transparency requirements, and additional obligations for “high-risk” AI systems. The UK regulators, on the other hand, have consulted on a principles-based approach. Their paper outlined the potential benefits and risks related to the use of AI, described how the current regulatory framework applies to AI, asked whether additional clarification of existing regulation may be helpful, and asked how regulatory policy could best support further safe and responsible AI adoption. 

In the US, the SEC5 proposed new rules that would impact investment advisers where they use certain technologies (including predictive data analytics) when engaging or communicating with investors. Advisers would need to identify and mitigate potential conflicts of interest between the firm and its investors and have written policies and procedures to facilitate compliance with the rules.

In Singapore, the MAS is taking yet another approach. In May 2023, it launched the Financial Sector Artificial Intelligence and Data Analytics (AIDA) Talent Development Programme, to increase the supply of talent and to build deep AI capabilities in the financial sector. It is a collaboration between financial institutions and training institutes. 

Meanwhile, firms are taking different approaches to the use of new “chat” technologies in the workplace. There is a concern that client data could be compromised, leading to a loss of client confidentiality. Some asset managers are taking a cautious approach until the full impact of using such tools is known.

Regulators expect firms that use AI and ML to have:

  • Appropriate governance, controls and oversight frameworks over the development, testing, use and performance monitoring of AI and ML.
  • Staff with adequate knowledge, skills and experience to implement, oversee, and challenge the outcomes of the AI and ML.
  • Robust, consistent and clearly defined development and testing processes to enable firms to identify potential issues prior to full deployment of AI and ML.
  • Appropriate transparency and disclosures to their investors, regulators and other relevant stakeholders.
Regulatory change chart

Regulators around the globe have been monitoring digital developments in the retail markets. Hong Kong (SAR), China found a significant increase in sales via online platforms, a poll in Ontario, Canada found that the majority of Ontarians are turning to the Internet, word of mouth or social media to inform investment decisions, and the regulator in Brazil has detected some “influencers” who may be disseminating investment recommendations without fully complying with regulations. These findings are in stark contrast to the continued regulatory focus on fund information documents and financial advisers (see Chapter 6).

In October 2022, IOSCO issued regulatory measures to address increasing risks and challenges from the digitalization of retail marketing and distribution. The measures included policy and enforcement toolkits. IOSCO noted that the rapidly evolving environment demonstrates the need for an increased regulatory focus on digital marketing and offerings and for efficient collaboration, on both a domestic and cross-border level, to promote a high level of investor protection at a global scale.

To address conduct risks and other issues associated with the use of digital media, the MAS consulted until June 2023 on proposals to enhance safeguards for proper conduct of digital prospecting and marketing activities of all financial products in Singapore, including on clarity and legibility. The proposals include additional requirements to address risks from misleading non-product advertisements (“NPAs”) and anonymous advertisements. NPAs will be subject to similar approval processes and vetting controls as product advertisements, and firms'/representatives' identities will have to be disclosed in anonymous advertisements. 

In addition, the MAS suggested amending existing advertising regulations to require firms to oversee and control activities conducted by digital “lead generation” firms, such as monitoring their activities, and conducting and ensuring proper data handling. It also proposed to require firms to provide a script setting out key information to be conveyed by introducers when prospecting customers and to prohibit the appointment of individuals solely engaged in introducing activities.

Other national regulators have announced, or are proposing to set out, enhanced rules on digital promotions as part of wider regulatory investor protection initiatives — see Chapter 6

The US SEC Division of Examination is focusing on registered investment advisers that are using emerging financial technologies or employing new practices, including technological and on-line solutions to meet the demands of compliance and marketing and to service investor accounts. This includes the offer, sale or recommendation of, or advice regarding trading in, crypto or crypto-related assets. The SEC is examining whether firms met and followed standards of care when making recommendations, referrals or providing investment advice, and whether they routinely reviewed, updated and enhanced their compliance, disclosure and risk management practices. And in terms of new rules, the SEC has proposed modernizing an exemption for smaller advisers that operate exclusively through the internet. The change would require such firms to have in place an operational, interactive website at all times to provide advice to all of their clients.

In its policy response to the Quality Advice Review in Australia, the government says its consultation will test how the proposals might operate under different advice models, including digital advice models, and across sectors. The government also announced its intention to standardize the consumer consent requirements to classify a consumer as a wholesale or sophisticated client. 


Regulators continue to increase their own use of technology. For example, ESMA's five-year data strategy includes scaling up its data capabilities and using new data-driven technologies, such as AI and ML. It has established a data intelligence and technology department, intends to strengthen its co-operation with EU national regulators on the use of data in supervision, and will develop an integrated reporting system for investment funds. It will also propose proofs of concept on the use of modern technologies to detect greenwashing practices.

In Singapore, the MAS intends to use data analytics to assist its supervision by:

  • Identifying funds where redemptions are expected to persist or whose proceeds are unlikely to be fully paid within the redemption period.


  • Identifying adverse data points from financial statements and audit reports via text analytics.


  • Collecting more granular fund data to enable a deeper understanding of individual retail funds managed in Singapore.


  • Enhancing its market scanning competencies, including the use of social media feeds to uncover emerging issues that may not be observable from conventional regulatory data.



The MAS has also partnered with Google Cloud to explore technology opportunities to advance the development and use of responsible generative AI applications within MAS, as well as cultivate technologists with deep AI skillsets.

More generally, the trend in regulators permitting electronic-only applications and filings continues. Recent examples include new online forms introduced in Ireland and Luxembourg.


Actions for firms:

  • Explore the possibilities of tokenizing assets and fund units within the guardrails of the existing regulatory framework.

  • Track regulatory developments on AI and ML, and consider appropriate use cases within the business.

  • Ensure online marketing and adverts are not misleading, and staff have relevant training to comply with the latest regulatory requirements.

  • Participate in regulators' efforts to promote innovation, and feedback on potential opportunities and risks.



Key topics captured within the report

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1Financial Conduct Authority

2EU Markets in Financial Instruments Directive

3European Securities and Markets Authority 

4Commission de Surveillance du Secteur Financier

5Securities and Exchange Commission