These consortia, such as USC, propose to issue digital tokens that are fully backed by central bank money, allowing instant settlement. This could also plug into ‘tokenised assets’ – conventional securities also represented on blockchain—and smart contracts. This can drive efficiency and resilience in operational processes and reduce counterparty risks in the system, unlocking billions of pounds in capital and liquidity that can be put to more productive uses.14 The potential transformation in retail payments is even more fundamental. Earlier this week, a cooperative of technology companies proposed a new payments infrastructure based on an international stablecoin – Libra. Libra would be backed by reserve assets in a basket of currencies including sterling. It could be exchanged between users on messaging platforms and with participating  12  Currently, the criteria for access to our balance sheet, defined at the time of the Winters Review, are three-fold: firms should be inherently exposed to overnight liquidity risk, they should be systemically important, and they should be regulated to the same standard as UK banks. In practice, that means banks, CCPs and broker-dealers are eligible for access, but other firms are not. The Bank will reach out to firms and to users of payments services to understand the needs of participants in this market and the barriers that still exist to competition and innovation. This dialogue will allow us to consult on the appropriate level of access to the Bank’s infrastructure.
While regulation must not front-run innovation, regulators must run alongside innovation •  We must know what’s going on and be ready: either to promote or to restrain. There are three ways in which MAS does this. One, we actively engage FinTech firms to better understand emerging innovations and help them design their solutions for financial services. Take for example cloud computing. •  •  Our traditional approach was to deal only with regulated FIs, not their service providers –  But with cloud solutions proliferating, we changed tack  –  Many of these solutions offered strong efficiencies and cost savings but not all models met our regulatory requirements for data integrity and protection. So we engaged in dialogue directly with cloud service providers to explain our concerns and at the same time understand the technology –  The service providers then came up with solutions that met our concerns  –  And we modified our requirements to take account of new business models and technological capabilities. Two, we allow our FIs to experiment with new technologies in a safe environment. FIs do not have to seek MAS’ permission to try new things. •  Responsibility lies with boards and management to assess the risks and put in place adequate safeguards  •  But with many innovations, it is not always possible to anticipate every vulnerability or whether there is a risk of breaching regulation. •  Sometimes, as Nike puts it, you have to “just do it”.