CAREC Institute Held the Seventh Chai Dialogue to Discuss Regulatory Environment for Digital Payments

On December 8, the CAREC Institute, in collaboration with the CAREC Secretariat and the Asian Development Bank, organized the 7th CAREC Chai webinar under the topic of “Regulatory Frictions in Digital Payments: Cross-Border Interoperability.” The webinar aimed to foster discussion on how countries can overcome regulatory frictions for digital payments in the CAREC region.

Mr. Kabir Jurazoda, Director of the CAREC Institute, welcomed the webinar participants and noted that cross-border payments face various challenges which hamper international trade and hence economic growth. While technological advances have made trade easier, they alone cannot fully address the complexities inherent in cross-border payment transactions due to differences in regulatory frameworks across jurisdictions, creating frictions and inconsistencies. Removing these regulatory barriers is an important step towards creating a cross-border payments system. “Through regional collaboration to harmonize regulatory standards and simplify compliance processes, we can create a more streamlined and interconnected payments ecosystem,” said Mr. Kabir Jurazoda.

The keynote presentation was provided by Ms. Leslye Sihuay Diburga, Senior Specialist of Cambridge Suptech Lab at the Cambridge Centre for Alternative Finance University of Cambridge. She noted the four most significant regulatory frictions for bank and non-bank payment service providers: i) data privacy and security regulations; ii) compliance with AML/CFT requirements; iii) differences in regulatory and oversight frameworks; iv) limited access to payment systems and infrastructure. To address them, she recommends that national governments make improving cross-border payment interoperability as a key policy objective by including enhancing cross-border payments in regulatory mandates, establishing a holistic national interoperability policy, and promoting regulatory impact assessments of cross-border payments. Regulatory cooperation for cross-border payments can be strengthened through existing international organizations, and by fostering regulatory sandboxes and innovation hubs. To modernize the regulatory frameworks, countries shall adopt a hybrid model combining entity-based and activity-based approaches and removing regulatory barriers to accessing domestic payment systems. More importantly, governments should encourage public-private partnerships, noted Ms. Leslye Sihuay Diburga.

During the open dialogue, leading experts representing various international organizations – ADB consultants Mr. George Kvirikashvili, Dr. Khimji Vaghjiani and Ms. Leah Castro, as well as Mr. Peter Lovelock, Head of Fair Tech Policy, Access Partnership Ltd. – provided feedback on regulatory aspects of the cross border digital payments. The panel discussion was moderated by Dr. Ghulam Samad, Senior Research Specialist at the CAREC Institute. Experts proposed to promote the adoption of internationally recognized technical standards to achieve technical interoperability, which can enable significant progress in developing a cross-border payment system that meets the needs of the modern digital economy and trade.