WG-REQ-1670 FIS Horizons 2025 STAGE 1 AH - copy - Flipbook - Page 14
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Hogan Lovells
Digital
transformation
Generative Artificial Intelligence (GenAI) advancements,
and emerging technology such as quantum computing and
distributed ledger technology (DLT), offer enormous opportunities
for innovation and efficiencies in numerous areas including
payments and settlement, open finance, programmable money
and tokenization. The practical difficulties of these opportunities
range from developing new systems (and transitioning from
legacy systems), working towards cross-border interoperability of
ecosystems, to mitigating increased cyber risk as well as navigating
compliance with new and evolving regulatory regimes.
AI is receiving significant attention from regulators around the world. The
EU AI Act is the most notable legislative development in this regard, and
is of particular interest to institutions in respect of AI systems that fall in
the category of ‘high risk’ systems, such as those used for remote biometric
identification; for credit scoring; or for employment/recruitment processes.
Other regulators, including the Bank of England and the FCA are also
monitoring the impact of AI on financial stability and consumer protection,
and with the recently published AI Opportunities Action Plan, the UK
Government is poised to take advantage of the growth of AI. We also expect
to see further clarity from the U.S. on their approach to the use of AI across
financial services this year.
We also expect to see the continuation in developments related to the
institutional adoption of DLT in a wide range of use cases, from issuing
digital bonds, tokenizing bank deposits, facilitating settlement, to using
DLT-based infrastructures for internal recordkeeping. Policymakers are also
experimenting with the technology. From a UK perspective, we are expecting
progress to be made over the course of 2025 on the pilot issuance of a digital
gilt instrument as part of the Digital Securities Sandbox, and the introduction
of a UK legislative regime for cryptoassets and stablecoins, while the Bank of
