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By Huw Jones
LONDON, March 7 (Reuters) - Regulators trying to policeinnovations in financial technology are waiting to see whetherstart-ups develop open systems or ones that allow only limitedaccess for users, a Bank of England conference heard on Monday.
Regulators are looking into new rules for so-called fintech,which includes peer-to-peer lending, and the use of blockchainor the distributed ledger technology underpinning the bitcoinvirtual currency.
The sector is still tiny but regulators worry it could growquickly and pose risks to the financial system.
"We need to understand what the model is," Bank of EnglandChief Cashier, Victoria Cleland, told the conference jointlyorganised by the BoE and London Business School.
The BoE is trying to "join the dots" between the potentialbenefits and risks from digital currencies, blockchain and otherinnovations, she said.
"With all these things going on, we need to be ready torespond to what would regulation mean," Cleland.
Banks are examining blockchain uses to avoid being caughtout like the taxi sector has been by online cab finder Uber orhoteliers by online accommodation company Airbnb, the conferenceheard.
But there is fierce debate over what sort of businesss modelis best, and whether it should be an open system that can beaccessed by the general public via the Internet, or a closed orpermissioned one with users vetted.
Andrew Weir, group chief technology officer at HSBC bank, said most big organisations were under constant attackfrom hackers.
"If the distributed ledger is a platform that getsincorporated into the Internet in some way, it will becompletely open to these forms of hacking," Weir said.
Charley Cooper, managing director of R3 Group, a consortiumof 42 banks, including HSBC, looking at ways to use blockchainfor trading bonds, said he has invited regulators to view theirwork.
"I don't know that there is any regulator in the world thatis anywhere near close to accepting the idea of a publicdistributed ledger for financial services," Cooper said.
(Reporting by Huw Jones; Editing by Keith Weir)
