Speech by Gerry Cross, Director, Capital Markets and Funds, Central Bank of Ireland at Blockchain Ireland Summit 2025

Technology, Innovation, Regulation –a powerful nexus for a successful financial system

Introduction

Good morning. I am pleased to be here once more to engage with the blockchain ecosystem in this time of rapid technological transformation. Engagement with our stakeholders is a priority for the Central Bank of Ireland.

The Central Bank serves the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers and the wider economy. For us, delivering on our four safeguarding outcomes - the protection of consumer and investor interests, the integrity of the financial system, the safety and soundness of firms, and financial stability guides all our work.

We seek to ensure that the financial system functions well in support of consumers, users, and the wider economy, that it is trusted to operate in customers’ interests and to be resilient, and that it avoids being used for financial crime and money laundering.

The rapid and complex changes that we are seeing, particularly in technology, present significant opportunities but also demand adjustments including in financial regulation. The Central Bank is future focused in the way we discharge our functions, which means anticipating and responding proactively to changes in the financial system.

At the Central Bank, we recognise the many potential benefits and opportunities that technology and innovation brings to financial services, to businesses, and to consumers in Ireland and more widely across Europe. It is important that these benefits can be realised, whilst also ensuring that the risks are well understood, and effectively managed.

Regulation and supervision play a crucial role in the safe, and therefore enduring, adoption of innovation into the system. I will speak about two important touchpoints for the Central Bank in this regard – our engagement with firms as we implement the Markets in Crypto-Assets Regulation (MiCAR) and our Innovation Sandbox and Hub. I will also explore relevant aspects of the European Commission’s recently published Strategy on Savings and Investments Union.¹

Innovation and outcomes

When we met this time last year, I spoke about the maturing relationship between technological innovation and financial regulation. There are a number of different aspects to this. First, there is the importance of innovation to the success of the financial system and how regulation recognises this. Second, there is the need for innovation as it develops and takes hold to understand and respond to regulatory concerns. Finally, there is the question of how these two perspectives come together in practice.² All of these aspects remain relevant today.

Markets in Crypto-Assets Regulation³

When we speak about the practical aspects of the relationship between technological innovation and financial regulation, a good place to start is the implementation of the MiCAR regime. MiCAR aims to provide a clear and harmonised framework for the regulation of crypto assets and related services across Europe and, delivered in an outcome-focused manner, places Europe in a very good position to benefit from this broad area of technological innovation.

The Central Bank is committed to achieving the benefits of this new EU regulatory framework for crypto assets while ensuring the risks are well managed. Therefore, the authorisation process in place for crypto-asset service providers (CASPs) in the Central Bank aims to ensure an effective implementation of the new MiCAR regime in Ireland cognisant of business demands and the 12-month transition period.

The Central Bank’s authorisation process is based on clarity, transparency, flexibility and predictability for firms seeking authorisation and we are well advanced in our authorisations pathway.

Delivering on MiCAR in a timely, outcome-focused manner is equally relevant for the DLT ecosystem. This is because a crypto sector composed of well governed firms, with good business models, effective risk management and a customer-centric approach, is a sector that is well placed to realise the potential benefits of innovation for consumers, for themselves and for society.

Today we are at an important juncture in MiCAR implementation with the first wave of authorisation “key facts documents” (KFDs) and formal applications from intending CASPs now received by us and moving forward.

Our authorisation process is informed, developed and refined by our own supervisory experience and by benchmarking to peer national competent authorities across the EU. Our expectations are consistent with how we want authorised firms to operate to deliver on our safeguarding outcomes and as such, firms’ business models and their approach to governance and accountability, consumer protection, risk identification and mitigation, and AML/ CFT will be of key interest to us in regulating this sector.

Our most recent crypto industry engagement took place in March on the concept of A Path to Success for MiCAR authorisations. This followed our previous event in July 2024. These complemented the ongoing bilateral interaction that we have with applicant firms and industry bodies by providing an opportunity for an exchange of views between all ecosystem participants. These events gave space for us to explain the Central Bank’s approach to implementation, and our areas of focus, all with a view to achieving a well-functioning and robust crypto sector that secures customers’ interests.

A key part of that engagement was highlighting the importance that we place on good governance and culture within firms, on effective safeguarding of crypto assets, as well as on controls over the risk of money laundering and other criminal activity. This means that firms must be appropriately established and effectively managed to meet the financial and operational requirements of their business model. And they must of course comply with the regulatory standards that are in place, in order to serve and protect consumer and investor interests, and to support the proper functioning of financial markets. 

Protection of consumer and investor interests is a fundamental objective for the Central Bank. This is demonstrated by our revised Consumer Protection Code, which launched in March this year, and which places the obligation for regulated financial firms to secure their customers’ interests at the heart of our consumer protection framework. Indeed the Code highlights that all firms should navigate innovation in a manner that incorporates securing customers’ interests into their commercial decision-making process and seeks to avoid creating risks to customers.

Risks to consumers are inherently high in some crypto and related services and crypto markets have been noteworthy for their significant volatility. While representing important progress, MiCAR will not provide the same levels of protection as exists for traditional financial investment products, nor will it mitigate all the risks linked to crypto-assets. We have issued a set of warnings to consumers concerning crypto markets and have expressed scepticism about business models where profitability is driven by the heavy marketing, offering and distributing of unbacked crypto to retail customers for speculative purposes. Firms seeking authorisation should understand that, where we see higher inherent investor protection risks in the products offered to customers and investors, we will have higher expectations of firm’s ability to manage these risks.

Our MiCAR industry engagement also allowed us to communicate in an open manner with the sector on the good characteristics and practices we are observing in firms, areas where we see room for improvement, our expectations of applicant firms and key principles for engagement with the Central Bank. These are all things that firms need to consider in order to move successfully through the authorisation process.

The European context

Avoidance of divergent approaches and/or the potential for regulatory arbitrage is an important objective for us. The Central Bank, along with other national competent authorities and the European Supervisory Authorities (ESAs), have worked closely together to deliver the effective and harmonised application of MiCAR and convergent authorisation and supervisory practices throughout the EU. This means a real-time sharing of authorisation experiences and approaches among authorities and includes fostering convergence on whether proposed business models are fully compliant with the MiCAR framework. It is delivering real results.

Developing and refining this mechanism for convergence at the gate is relevant, not just in the context of MiCAR, but also for financial services more broadly particularly where these are provided on a cross-border basis across the EU. Looking to the past, the work happening now in relation to CASPs draws on, and builds on a similar approach adopted in our work on Brexit-related authorisation applications.

In December 2024 the EBA confirmed their intention to clarify the interplay between PSD2 and MiCAR. We are following this work closely. It is expected to conclude in the near future. Where it implies any additional steps for an applicant firm we will engage with the relevant firm with a view to achieving maximum integratedness and efficiency.

Innovation Sandbox Programme 

The Central Bank continues to enhance our approach to engaging with new technology and in 2024 we successfully launched our Innovation Sandbox Programme, providing regulatory advice and support to inform the early stage development of selected innovative initiatives that promote better outcomes for consumers and the financial system.

Through the programme, we aim to provide regulatory advice and support to firms on their innovative projects, in line with our public policy objectives. Our Innovation Sandbox Programme takes a thematic approach. “Combatting Financial Crime” is the theme of the first programme.

This is a good example of the role of the Central Bank in encouraging collaboration across the ecosystem in a way that promotes better outcomes for consumers and the financial system. Financial crime is an important topic and fraudulent payments is an important concern, especially in the rapidly evolving digital marketplace. Fraudsters continually adopt new ways to exploit digital systems and bypass security measures, costing businesses and individuals millions each year. The total value of fraudulent payments rose by 26% in 2023, increasing to €126m from €100m in 2022.⁴

A key aspect of our Sandbox is the idea of creating a context in which certain outcomes – in this case combatting financial crime – can be enhanced by collaboration between regulators and innovators and amongst them.

Our Innovation Sandbox Programme received an impressive volume of applications - 38 in total—from across the innovation ecosystem. This strong response highlights the appetite for innovation and efforts to address financial crime in transformative ways. From those applicants we selected a final list of seven participants. They are a diverse group of innovators from Ireland, across Europe and the UK, including start-ups, scaling firms, partnerships and established financial services firms.

They are focused on developing or scaling innovative technological solutions including in areas such as data sharing, identity verification, fraud prevention, and so on. So a diverse range of solutions within the overall theme.

Our programme completes in June with our final showcase being held on June 9^th with participating firms, and we are looking forward to sharing our learnings following completion.

Innovation Hub

Another significant way in which the Central Bank engages with innovation is through our Innovation Hub, which helps innovators developing financial services using new technologies to navigate the regulatory landscape.

Very soon to be released is our Innovation Hub Report 2024. By the end of 2024, the Central Bank Innovation Hub had held 450+ engagements with the innovation ecosystem since its establishment across a number of sectors, including payments, regtech, blockchain, crypto, and insurtech.

We continue to have many engagements with small and micro sized firms in the earlier stages of their development.

In 2024 we saw:

• strong engagement from start-ups seeking to build an understanding of regulation and compliance early into their business model and approach,
• established and maturing firms engage with us to discuss their future innovation roadmaps, and
• engagement with commercialisation projects in universities as they seek to leverage cutting edge innovation.

Of particular relevance to this audience, almost a quarter of enquiries in 2024 came from firms using blockchain technology and we see the increasing adoption of blockchain and distributed ledger technology as an accelerating trend, with firms leveraging these tools to enhance security, transparency and efficiency.

Funding innovation

Next, I would like to touch on funding innovation. A key role of the financial system and capital markets is to support productive companies in the real economy. The Draghi Report on EU Competitiveness sets out the financing needs facing Europe including the need to accelerate innovation, to close the innovation gap with global counterparts especially in advanced technologies and to continue to decarbonise and shift to a circular economy. All the while preserving social inclusion.

We know that innovation, including technological innovation, is both very important and very hard. It may be amongst the most difficult things to do: to develop a new idea, to bring it to commercial viability, and then to scale it to being an economic success story. One of the risks that we call out in our Regulatory and Supervisory Outlook⁵ is that investment financing may be unable to support the funding of innovation and the scaling of Irish and other EU companies.

A recent ESMA report sets out that Euro-area non-financial firms rely significantly more on bank financing than, for example, their US counterparts, that IPO volumes in the EU are flat, and that numbers of companies de-listing from EU markets have increased.⁶ Of course, there are a variety of factors that impact a company’s choice of funding options but this does point to European capital markets not being as effective as they could be.

Improvement is not something that can be achieved by a single actor. The European Commission’s strategy for Savings and Investments Union is to be welcomed as taking a holistic approach to improving investment and financing, emphasising the need for dynamic local ecosystems, and for measures at both EU and national levels.

In terms of the role of regulation, it is not possible to regulate the necessary ecosystem into existence – although financial regulation has an important role to play. More generally, in these more uncertain economic times, it is important that firms and investors not lose sight of the need to continue to innovate and invest in technology. While economic cycles come and go, the digital transition rolls on, and we cannot be left behind.

A second major limb of Savings and Investments Union involves encouraging and incentivising consumers to hold more of their savings in capital-market instruments as EU citizens can benefit from investing in capital markets, where they can get higher return from their savings.

However, it is important to acknowledge that the aim of financing companies in the real economy on the one hand, and the aim of enhancing retail participation to support lifelong financial wellbeing on the other, are distinct (although interconnected) objectives.

Investing necessarily involves an element of risk and the goal must be for retail investors to be well-informed, to understand both the potential risks as well as the potential rewards of their engagements with financial markets, to be treated fairly, and to be supported to make the investment choices that best align with their individual needs.

Market Infrastructure and Tokenisation

Finally I would like to briefly touch on the interaction between financial market infrastructure and new technologies such as distributed ledger technology (DLT) and tokenisation (i.e. the process of directly issuing or generating a representation of an asset in the form of a digital token using DLT).

The European Commission addresses the aim of leveraging these innovations in the context of enhancing the interoperability, interconnection and efficiency of EU trading and post-trading infrastructures in its Strategy for a Savings and Investments Union.

DLT provides the potential for efficiencies and cost reduction in the currently fragmented trade and post-trade space. However much of this potential is still to be realised. There are also challenges and issues to be worked through by the financial system before integrating DLT into our financial plumbing. For example, do we understand and are firms ready to manage and mitigate the inherent risks of DLT from a cyber, governance, operational and asset safeguarding perspective? How do we avoid creating multiple, fragmented DLT systems?

This is a question that the regulatory and central banking system is seeking to explore and the opportunities are there for market participants who wish to engage. In 2024, the Eurosystem tested three interoperability-type solutions for using DLT to settle wholesale financial transactions in central bank money. The initiative was expanded in February this year to apply a two-track approach first, to develop a solution that is interoperable with existing infrastructures; and second to look into long-term integrated solution.⁷

The European Commission currently has an open targeted consultation on integration of EU capital markets, which seeks to understand issues around interoperability and the potential need for standardisation. The consultation also seeks to understand what changes to the DLT Pilot Regime are needed to allow both new entrants and established entities to deploy DLT to trade and settle financial instruments. This reflects that the DLT Pilot Regime, which was intended to enable the use of this innovative technology, has seen limited use since its introduction in 2023.

In terms of innovation, the Central Bank has an important role to play with a unique vantage point as an integrated Central Bank and financial regulator. This includes ensuring that there are no unintended regulatory impediments to tokenisation of traditional assets including industry engagement to see if enabling regulation is required. And in line with our goal of fostering innovation that delivers good outcomes for investors, we can seek to drive and influence change at a system level.

From our perspective, as with any new technology, a good outcome will be that risks are well understood, and any change occurs in a safe manner, maintaining investor protection, market integrity and financial stability, so that benefits can be achieved in enduring way.

Let me conclude here. It is always a pleasure to exchange views with the Blockchain ecosystem. I hope my comments have given you a sense of many of the things currently underway in this space. I look forward to our Q&A session.

[1] European Commission, Savings and Investments Union: A Strategy to Foster Citizens’ Wealth and Economic Competitiveness in the EU.

[2] Gerry Cross “Technological innovation and financial regulation – a maturing relationship”

[3] “MiCAR Industry Briefing- Remarks by Gerry Cross, Director of Capital Markets & Funds” 

[4] Behind the Data – Insights from Irish Payment Fraud Statistics 

[5] Regulatory & Supervisory Outlook  (PDF 2.15MB)

[6] ESMA: Building More Effective and Attractive Capital Markets in the EU - Position Paper 

[7] Eurosystem expands initiative to settle DLT-based transactions in central bank money,  See also Makhlouf: Digital Dividends: (unlocking) innovation in the payments ecosystem,