Financial markets, technological innovations and financial stability: risks and problems of regulation

Abstract

Objective: to identify characteristics of modern financial technologies, which have become a catalyst for rapid and irreversible changes in the financial sector; to classify the problems of regulation of finance technologies and their products; to search for a compromise between the promotion of financial innovations and financial risks to ensure financial stability. Methods: systematic approach to the cognition of economic phenomena, enabling to study them in dynamic development, taking into account the influence of various environmental factors. The systematic approach determined the choice of specific research methods: empirical, historical, logical, comparative, and statistical. Results: it is shown that the modern financial system is evolving towards its decentralization based on the distributed registers and blockchain technologies. The evolution of decentralized platforms and their impact on the development of crypto networks are considered. The basic principles and working mechanisms of decentralized crypto networks, the advantages and disadvantages of decentralized protocols are reviewed. It is shown that the development of a decentralized financial market is inextricably linked with centralized technologies - artificial intelligence technologies and the use of software interfaces, big data analytics and machine learning. The use of modern financial technologies reduces barriers and costs of entry to the markets for financial intermediaries, but also generates new risks in the system, requiring codification and updating of regulation forms. Regulatory actions of the authorities aimed at minimizing the risks generated by innovative technologies are also described.Scientific novelty: the article shows for the first time that the basis of the modern financial system is decentralized technologies of distributed registers and blockchain, which allow maintaining databases, reaching consensus, generating new transactions and controlling them from more than one center of the distributed network. In order to maximize the impact of the third era of the Internet, decentralized platforms must be synchronized with centralized technologies, the development of which contributes to further decentralization of the financial system. In order to maintain financial stability, prudential regulators and supervisors will have to find an effective compromise between encouraging further financial innovations and the financial risks posed by them.Practical significance: the main provisions and conclusions of the article can be used to clarify the target mandates, tools, channels and mechanisms of monetary policy of the Bank of Russia, directly related to technological innovations, acting, under the growing uncertainty in the economy, as a built-in stabilizer of financial stability, elastic regulation of trading and financial imbalances within the country and between countries.

Keywords

• аспекты цифровой экономики
• децентрализация
• регулирование
• финансовая стабильность
• финансовые технологии
• финансовый рынок
• центральный банк