Introduction: Mathilde Mesnard, Acting Director for Financial and Enterprise Affairs, OECD Welcome address: Mathias Cormann, Secretary General of the OECD Ministerial keynote: Rt Hon Jesse Norman MP, Financial Secretary to the Treasury, United Kingdom High-level discussion: In 2015 The Economist magazine hailed blockchain as “the trust machine”, capable of replacing governance structures, displacing institutions and bringing a new level of transparency to transactions and information, with implication across public life. In the years since, the technology has produced trillion-dollar decentralised financial markets and a slew of innovation over enterprise blockchains but also, as OECD research shows, no breakthrough innovations in government and minimal impact in the public sector. The radical disruption foreshadowed by the technology’s enthusiasts still seems distant, dependent on pre-existing robust public governance systems, and in need of regulatory guardrails. The raison d’etre of many public institutions is the provision of public goods, and the underwriting of rights and the social contract – functions that blockchain’s pioneers sought to replace with cryptography, networks and protocols. Whether this technology will be used to either displace or complement traditional governance models is an open question, as is its ability to deliver such transformation. The Forum’s opening discussion brings together three thought-leaders at the intersect of tech and governance to disentangle blockchain’s promise from reality, and explore the extent to which the technology can be guided by governments towards better models of social and economic connection.

International regulatory cooperation is a foundation of the global economy, allowing countries to address shared challenges and allowing the flow of people, goods, capital and data across borders. Digital technologies, which often transcend national boundaries, has made such cooperation more important than ever, and more complex. Blockchain has added a new facet to these efforts, enabling new breeds of global digital goods and services, with new levels of interconnectedness, on networks that can sometimes appear beyond traditional regulatory reach. The Forum’s opening panel will identify the gaps in international regulatory cooperation on blockchain, explore existing and emerging approaches to fill them, from policy guidance, technical standards, bilateral agreements and other international norms, and explore potential actions towards a more consistent global policy environment.

The COVID-19 pandemic has accelerated economy-wide digitalisation, including in international trade. Blockchain projects that were still at an exploratory stage a few years back are now increasingly being deployed. The potential for blockchain to facilitate trade by increasing transparency and reducing transaction costs is relevant for all stages of the supply chain, from customs procedures to trade finance and logistics, and ensuring responsible business conduct. However, legal, institutional and technical issues still hamper the scaling up of these applications. Blockchain technology – as other digital trade facilitation tools – must harness network effects across both public and private stakeholders to drive operational efficiencies. These network effects rely on smooth interaction across institutional structures. This highlights the importance of cross-border co-operation in a complex and evolving regulatory landscape for digital trade. This session takes stock of the challenges to the scaling up of blockchain technology for facilitating international trade and explore how policy can best support the use of blockchain for supply chain efficiency, resilience, transparency and integrity.

In 2019, the Financial Action Task Force (FATF) changed its global Standards to place clear anti-money laundering and countering the financing of terrorism (AML/CFT) obligations on virtual assets and their service provider. These Standards are only effective if countries and the private sector are implementing these Standards in practice. While there has been progress, the lack of effective regulation is allowing for jurisdictional arbitrage and the raising of money laundering and terrorist financing risks. This session will focus on the progress the global community has made in implementing the FATF Standards and the areas where more progress is needed.

Public, unpermissioned blockchains have created vast decentralised networks spanning across nations on which a range of digital goods and services are now being delivered. The value created over these networks, estimated at over USD $2 trillion, has also created a fiercely competitive business environment to secure the digital assets awarded to actors hosting, verifying and supporting activities on the blockchain. With activities spread over jurisdictions with inconsistent – and sometimes weak or fragile – regulatory, legal, and institutional frameworks, there are growing concerns among industry participants and public bodies about sustainability and business conduct risks across some blockchain value chains. Commentary has focussed largely on potential environmental impacts, notably the energy consumption of prominent networks like Bitcoin and Ethereum, but there are wider social and governance considerations. While network participants should seek foremost to “do no harm”, there may also be opportunities to actively work towards positive social impact. This session seeks to understand how Responsible Business Conduct principles can be applied in public blockchains, by mapping out the ecosystem of public blockchains, and identifying specific risks within operations, key actors in the supply chain for digital assets, and responsibility for due diligence and disclosure. It looks to connect this nascent conversation in the blockchain industry with experiences in other sectors, and highlight options for strengthening market integrity going forward.

Blockchain and the decentralised structures that it enables have generated predictions of transformative impacts on both markets and corporate governance. This may be seen both in terms of efficiency gains for corporate governance practices, for example in relation to shareholder voting and trading, but also more broadly in the way companies are governed, such as through the emergence of Decentralised Autonomous Organisations (DAOs) and Decentralised Finance (DeFi). However, for all these predictions, other developments, notably relating to the COVID-19 pandemic, have arguably led to greater transformations so far for corporate governance than Blockchain has. This session will start with a keynote from Anat Guetta, Chair of the Israel Securities Authority, describing insights from Israel’s experience in adapting its capital markets to the digital age. The panel that follows will assess why Blockchain has not had the envisioned impact on corporate governance yet, and what changes may still lie ahead. It will also investigate how corporate governance and capital markets more broadly are evolving in light of recent trends; the related challenges, risks and opportunities; and what policy-makers and regulators need to consider to better harness their potential benefits while minimising the risks.

Central banks are actively researching the benefits and drawbacks of offering a digital currency to the public through the issuance of central bank digital currencies (CBDC). CBDCs, as any payment service, should be appropriately supervised and regulated to address challenges and risks related to financial stability, consumer protection, privacy, taxation, cybersecurity, operational resilience, money laundering, terrorist and proliferation financing, market integrity, governance, and legal certainty. The understanding of CBDCs has advanced significantly in the last few years through published research, policy work and proofs-of-concept from central banks at national level and through global cooperation consortia or hubs established across the world. Yet, still a lot of issues remain to be explored by policymakers. This session will discuss progress made around CBDC design considerations and practical examples of pilots undertaken, and will touch upon areas which remain to be addressed and associated policy considerations.

Global spending on AI is forecast to double over the period 2020-24, growing from USD50.1bn in 2020 to more than USD110bn in 2024. Growing AI adoption in finance is enabled by the abundance of available data and by more affordable computing capacity, and is expected to be increasingly a driver of competitive advantage for financial firms by creating efficiencies and enhancing the quality of financial services offered to consumers. At the same time, the deployment of AI in finance could amplify risks already present in financial markets and give rise to new challenges and risks. This session will explore how the deployment of AI in finance is expected to affect financial market activity in Asian markets and beyond; whether and how it will affect authorities’ ability to monitor and assess new types of emerging risks; and high-level policy recommendations to address such risks.

The amount of data created annually worldwide has grown exponentially and forecast to more than double between 2021 and 2025, driven by both the enhanced ability to capture of store information, and the demand for data from the expanding use and growing capacity of AI and other big-data analytical technologies. As highlighted in the upcoming OECD’s upcoming AI Systems Classification Framework, responsible and trustworthy AI requires quality inputs, while data ethics are becoming a useful touchstone for the technology’s regulation and governance. The value of cross-sector and cross-border data flows are also an important element to this ecosystem, and require robust governance arrangements, particularly for public data and for data relating to individuals. This discussion considers blockchain’s place in this ecosystem, particularly its ability to provide verifiable and auditable data, control access to data and promote transparency in the exchange of data over large networks, and the ramifications for approaches to AI and data at the national and international level.

The OECD Business and Finance Outlook is an annual publication that presents unique data and analysis on the trends, both positive and negative, that are shaping tomorrow’s world of business, finance and investment. The 2021 edition of the OECD Business and Finance outlook focuses the tremendous potential and corresponding challenges of artificial intelligence (AI) applications for business and finance. It highlights the ways that AI is transforming market structures, business models and corporate behaviour, focusing on key policy areas such as finance, competition, responsible business conduct and security concerns related to foreign direct investment in AI. It also examines the supervisory technology tools that can help to ensure regulatory oversight, detection and enforcement by governments in these areas. It puts forward priorities and recommendations for policy makers and market participants seeking to strike a balance between fostering innovation in AI while also mitigating associated risks to market stability and a level playing field. Find out more about the Publication here: https://www.oecd.org/finance/ai-in-business-and-finance.htm

Decentralised Finance or ‘DeFi’ is the latest development in the crypto-asset space, and promises to replicate the traditional financial system in an open, decentralised, permissionless and autonomous way, through applications built mainly on the Ethereum blockchain network. The total value of crypto-assets locked in DeFi applications as of 31 March 2021 reached USD42.9bn up from USD1.9bn on 2 July 2020 (c. 2,150% increase, albeit from a very low base). The DeFi space is worth delving into due to its rapid growth within the volatile crypto-asset markets, use of leverage, and attraction of an increasing number of largely unprepared retail investors, exposing them to high risks. Also, as crypto- asset activity is increasingly becoming mainstream, the boundaries of the two systems become more porous. Increased interconnectedness of DeFi with traditional financial markets may give rise to potential risks of spillovers to the markets and the real economy. This session will discuss the evolution of DeFi and its mechanics with a view to better understand its activities, structures, potential benefits and underlying risks, as well as initial key considerations for policymakers in Asia and beyond.

Asset tokenisation enabled by distributed ledger technologies (DLTs), mostly theoretical just a few years ago, is now a reality with successful pilot projects around the globe. The rise of tokenisation presents important opportunities for increased market efficiencies and inclusion (e.g. securities issuance, trading, clearing and settlement), while at the same time raise important questions about the role of financial intermediaries and the overall structure of the financial markets. This session will discuss how regulators and policymakers in Asian markets and beyond have been approaching the rapid expansion in the global use of tokenised assets, and the range of policy responses to emerging issues in this nascent market, including areas that may warrant further attention from policy makers.