Speaking at a joint FinTech seminar with the IMF-Bank of Lithuania in Vilnius, Tao Zhang said that FinTech can support "productivity and growth by strengthening financial development, inclusion and efficiency".

However, it also poses risks to consumers and investors and to financial stability and integrity.

"Fintech is expected to promote competition in the financial sector particularly in payments clearing and settlement, and is helping to expand financial inclusion," Zhang said.

However, he added that there is a perception that FinTech also brings risks, and that monitoring is still limited to activities and entities in the regulatory perimeter.

 "Gaps in the legal framework are widely acknowledged, as is the need to modernize data governance frameworks," he said.

Zhang said that as technology knows no borders, neither does financial misconduct.

He therefore called for greater international co-operation, particularly on cyber security and anti-money laundering/combating the financing of terrorism risks, on developing legal, regulatory and supervisory frameworks, on domestic and cross-border payment and securities settlement systems.

 "We need to avoid the fragmentation that comes when countries develop isolated national approaches," Zhang said.

Zhang urged regulators to create a supportive space for innovation, while maintaining a robust regulatory framework to protect consumers and financial stability.

Speaking at the Atlanta Federal Reserve Bank Conference about the digitisation money and finance, Zhang said that, for now, cryptoassets "are still relatively insignificant compared with conventional assets, and, so far, they do not pose a threat to macro-financial stability".

 However, he believed that this could change and therefore suggested that regulators and central banks follow four points: 

• Regulators should complement their focus on entities with increasing attention to activities as an increasingly diverse group of firms and market platforms are providing financial services.
• Governance needs to be strengthened to ensure that consumers or the financial system are not exposed to undue risk.
• Policy options could be considered to support open networks, and licensing policies could be adjusted to help foster competition.
• Legal principles need to be modernised. Maintaining trust in financial services may also require the development of new legal frameworks to clarify rights and obligations within the new financial landscape.

According to Zhang, some regulators have started addressing some of these challenges, but the development of effective regulations is still at an early stage.

"Cryptoassets exemplify the difficulties that regulators face in the fast-changing realm of Fintech. They are difficult to regulate because they cut across the responsibilities of different national agencies, and operate on a global scale. Many are opaque and outside of the conventional financial system, making it difficult to monitor their operations", he said.

According to Zhang, the bottom line is that policymaking will need to be "nimble, innovative, and co-operative".

He also discussed how financial services may be transformed by the adoption of financial technology before examining how the rise of cryptoassets may pose challenges to financial integrity and stability.

For Zhang, both opportunities and risks are associated with cryptoassets.

On the positive side, he said that some useful technology is being developed to improve market efficiency.

"For example, services have slashed from days to minutes the time it takes for cross-border payments to reach destinations."

However, as with other forms of FinTech, cryptoassets also "have the potential for criminal activities".

They can, for example, mask identities, which makes them attractive to money laundering, terrorist financing, tax evasion and fraud.