Global cooperation needed to avoid regulatory fragmentation in AI, tokenisation - FIA Asia

A panel of industry experts at the FIA Asia Conference in Singapore on Thursday emphasised the need for global regulatory cooperation for digital assets and AI as they increasingly influence financial markets.

Mitja Siraj, vice president of legal, Europe at FIA, highlighted the benefits of AI when it comes to increasing market transparency, liquidity and regulatory reporting. However, AI also brings with it risks around data privacy and financial stability.

Looking at the European landscape, Siraj noted that existing financial regulations already provide sufficient overnight on market integrity and resilience so the key focus for policy makers should be focus on outcomes such as consumer protection.

“There is a need for global regulatory cooperation to avoid fragmentation and ensure consistency,” he added.

Legal recognition for tokenisation remains varied depending on jurisdiction and an important question to ask revolves around ownership and the operational risks attached. Regulators remain cautious but Siraj noted that the Monetary Authority of Singapore is at the forefront when it comes to tokenisation regulation.

In Hong Kong, Chin Chong Liew, partner at King & Wood Mallesons, noted that the jurisdiction has been very progressive on digital asset regulations, particularly around stablecoins, which has seen 37 issuance applications.

While it was a latecomer for tokenisation, Hong Kong picked up speed about three years ago, offering a suite of products from funds to bonds and has focused on taking a “same risk, same activity, same regulation” approach.

However, China’s negative stance on crypto has put Hong Kong in an “awkward dilemma” under the one country, two systems governance framework.

“Hong Kong and international players are pushing full steam ahead but the Chinese players are in waiting mode,” he added.

Ave King, chief compliance officer APAC at FalconX, highlighted the compliance challenges with AI as the speed at which transactions happen in the institutional space and exchanges differ greatly.

Looking at token payments, King noted questions around due diligence and anti-money laundering, particularly on ownership and travel rule compliance, remain difficult to grapple with.

London-based digital asset clearing house ClearToken has adopted Nasdaq’s ‘Eqlipse Clearing’ platform to develop its new clearing and settlement service ‘CT Settle’ for digital assets.

Speaking at FIA Asia, Singapore’s financial regulator emphasises the importance of innovation, supervision and partnership as financial markets adapt to technology developments.