Peer-to-Peer Financial System 2023: the event organized by the Bank of Italy

Peer-to-Peer Financial System 2023 was held on 26 and 27 September in Rome, the event jointly organized by the Bank of Italy, UCL for Blockchain Technologies and the DLT Science Foundation. 

The Cryptonomist was invited to the event and we attended several of the lectures, taking note of the goal of the conference itself: the union of traditional finance and the centrality of it, with new and expanding decentralized financial technologies. 

The Peer-to-Peer Financial System 2023 in Rome

Without a shadow of a doubt, one of the most important events both academically and internationally. The support of the Central Bank made sure to have leading figures from every field and every industry related to Blockchain and Web3 concepts.

A conference not only exposed to Italy, but internationally. Financial innovation seen from different points of view, from different countries, and from different institutional and non-institutional positions. 

The different backgrounds of each participant resulted in an intense, if respectful, debate. Each participant was able to have his or her say, with one common goal: to adapt to change. 

And although it may seem an oxymoron to combine centrality and decentralization in the world of finance, there is no shortage of ideas for doing so. 

Exploring the frontiers of Peer-to-Peer financial systems: insights from the workshop

In an era of rapid technological transformation, the financial landscape is witnessing a profound evolution, driven by innovations in digital technology. 

The recent “Peer-to-Peer Financial Systems Workshop,” provided a platform for experts from diverse backgrounds to converge and deliberate on critical issues. 

The impact of technological innovation

Technological innovation is reshaping the financial sector, redefining business models, improving services, restructuring value chains, and even reshaping regulatory oversight. 

The application of new technologies, particularly in the financial sector, presents both opportunities and challenges for traditional players, newcomers, and regulators.

One important example discussed during the workshop was the open banking model, influenced in particular by the European Payment Services Directive (PSD2). This paradigm shift forces intermediaries to adopt new business models, expanding revenue streams and service quality. 

However, it simultaneously exposes them to a wider range of risks, including fraud, cyber threats, operational challenges and strategic risks. The introduction of the open finance model, proposed by the European Commission, could amplify these effects.

Digital innovation and regulatory mandates

Digital innovation not only benefits financial institutions, but also enables public institutions, authorities, and regulators to fulfill their mandates. These include combating money laundering and terrorist financing and safeguarding financial and monetary stability. 

Central bank digital currencies (CBDCs), which several European central banks are actively exploring, exemplify this commitment to research and development to achieve these goals.

However, regulators are faced with the complex task of balancing the promotion of innovation with consumer protection, ensuring the inclusion of less digitally savvy users, maintaining robust market infrastructures and payment systems, and preserving the overall security and stability of the financial system. 

Achieving “good innovation” while managing potential risks was a focal point of discussion.

The emerging financial ecosystem underscores the growing importance of non-financial risks, particularly in the areas of cybersecurity and data protection. Traditional risks are also being exacerbated in this evolving landscape. 

Thorough analysis and research are critical to effectively understanding and managing these new complexities. Clear awareness and understanding are critical for both financial professionals and customers to address these challenges.

One area where policy and regulatory attention has grown substantially is the cryptocurrency ecosystem. 

The report highlights the need for clear references, communications and regulatory frameworks in this area. 

The introduction of MiCA at the European level is a significant step forward in the regulation of crypto-assets, but the rapid evolution of the ecosystem requires continued oversight.

Dynamic regulation for dynamic innovation

The speed of innovation presents a unique challenge, requiring a regulatory framework that not only tracks innovation but actively addresses it. A dynamic and modular approach to regulation is essential. Practitioners, supervisors, and regulators must develop skills to effectively understand and manage the risks arising from innovation.

Improving knowledge and awareness of the new financial ecosystem is critical. 

Constructive dialogue between regulators, academia, industry practitioners and technology providers is critical to harnessing the potential of innovation while managing the associated risks. Encouraging best practices, setting common standards, promoting sound operating models and addressing economic, social and environmental impacts are essential aspects of this dialogue.

The BoI, in collaboration with various stakeholders, has formulated a comprehensive strategy to support financial institutions and promote sustainable, sound and responsible innovation. 

This strategy includes several key initiatives, including the FinTech Channel, the regulatory sandbox, and the Milano Hub, which help facilitate innovation in the sector.

Toward a sustainable financial future

Workshop sessions covered a wide range of topics, from emerging technologies to open finance, from central bank digital currencies to sustainability. 

The growing interest in aligning financial activities with the Sustainable Development Goals (SDGs) was evident. Achieving the SDGs is a complex undertaking that requires collective efforts from policymakers, practitioners and the public.

In conclusion, the Peer-to-Peer Financial Systems Workshop was a key platform to explore the evolving landscape of financial innovation. 

It underscored the importance of dynamic regulation, robust research and constructive dialogue to address the challenges and opportunities presented by technological advances. This collaborative approach is essential to ensure the development of sustainable and resilient financial systems that benefit society as a whole.