BALANCING INNOVATION AND REGULATION: A NEW LEGAL APPROACH TO DIGITAL FINANCIAL SERVICES
Keywords:
Digital finance, regulatory sandboxes, fintech regulation, innovation policy, financial stability, adaptive regulation, RegTechAbstract
This article examines the challenge of balancing innovation and regulation in digital financial services and proposes a new legal approach to address this tension. Through analysis of contemporary regulatory frameworks, the study explores innovative mechanisms including regulatory sandboxes, principle-based regulation, risk-based supervision, and collaborative governance models. The research demonstrates how traditional regulatory approaches often fail to accommodate the rapid pace of technological change in financial services, necessitating more adaptive and flexible frameworks. Key findings highlight the effectiveness of regulatory sandboxes in fostering controlled innovation, the benefits of hybrid principle-rule based approaches, and the importance of proportionate regulation tailored to firm size and risk profiles. The article also examines the role of regulatory technology (RegTech) and supervisory technology (SupTech) in enhancing regulatory efficiency while promoting innovation. The proposed legal approach emphasizes adaptability, stakeholder collaboration, and international cooperation as essential elements for successfully regulating digital financial services while maintaining consumer protection and financial stability.
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