Rethinking the Regulation of Financial Infrastructures: A New Conceptual Framework

Financial infrastructures (‘FIs’) sit at the heart of the financial system and are commonly described as the ‘plumbing’ or ‘rails’ of finance. As the most interconnected intermediaries linking together multiple parties, they generate systemic risks and therefore require a robust regulatory scaffolding to respond and contain potential disruption. Yet, despite the decades of regulatory wisdom and post-GFC (2007-2009 Global Financial Crisis) regulatory refinements, gaps nonetheless remain.

My new article ‘Rethinking the Regulation of Financial Infrastructures: A New Conceptual Framework’ published in the Banking and Finance Law Review (Volume 42(3), August 2026) challenges the accepted taxonomy of financial infrastructures, identifies emerging gaps in the regulation of FIs and proposes an expansion of the de facto international standard in FI regulation – Principles for Financial Market Infrastructures (‘PFMIs’).

My starting premise is simple. The success and wide adoption of the PFMIs has focused the global regulatory attention, and with it the attention of legal scholars, on a subset of FIs – financial market infrastructures – while other infrastructures in finance have evaded regulatory scrutiny for a long time, generating a false sense of security and perhaps even complacency, obscuring other channels for transmitting systemic risks. Proper recognition of the importance of new channels of systemic risk is crucial but may come too late (the GFC is, yet again, a powerful reminder of this dynamic).

Although lessons have been learned from the GFC, international regulatory coordination in finance remains largely reactive. In the absence of a major global crisis centred around other types of FIs, there have been few international attempts to tackle the risks they pose – and even those are deficient in certain respects (as discussed in detail in the article). I argue that this status quo is unsustainable. Financial infrastructures inherently possess the capacity to generate systemic risks, and hence a proactive approach, one that does not entail waiting for the risks to materialise, should be preferred. 

Two types of financial infrastructure falling outside the ambit of the PFMIs are used to demonstrate this dynamic. The first illustration revolves around meta-infrastructures (or infrastructures supporting other financial infrastructures) like financial messaging systems serving as the backbone of correspondent banking and settlement transactions. The second involves critical blockchain infrastructures operating as the foundational layer underpinning higher-tier blockchains and applications built on them.

The article argues that these financial infrastructures demonstrate the same dynamics (concentration, economies of scale) as the PFMI-governed market infrastructures, along with the associated risks, including weaponisation by powerful states, and rebuts certain defences against regulation (including the so-called decentralisation defence). It further stresses that the failures of certain infrastructures to maintain fair access have profoundly undermined institutional trust in them and, considering the lack of meaningful risk-mitigating strategies aside from complete infrastructural re-engineering (which has already started in a number of jurisdictions), proposes a coordinated regulatory response to tackle the major risks linked to both incumbent and emerging financial infrastructures that do not fall within the scope of the PFMIs.

After establishing the need for greater coordination, the article makes practical recommendations to assist with modernising the international regulatory framework for financial infrastructures. First, it proposes a new functional legal definition of ‘financial infrastructure’ that overcomes the scope limitations of the PFMIs and then immediately tests that definition by applying it to various market and non-market financial infrastructures, as well as non-infrastructure level service providers, to verify the proposed approach. Second, it argues that there are clear efficiency gains that flow from modernising the PFMIs, instead of formulating an entirely new set of international rules for financial infrastructures. To support the proposed approach, it tracks the recent uncoordinated attempts by international standard-setting bodies and regulators to create a legal backstop for the previously unregulated activities using the PFMIs as the blueprint – a process the paper labels ‘PFMI creep’, which involves the ongoing creation of new PFMI-like (or PFMI-lite) ‘pockets’ of regulation applicable to financial infrastructures outside the scope of the PFMIs. Third, the article proposes new principles intended to overcome some of the recurring issues in the PFMIs such as the lack of working mechanisms to deal with conflicts between different principles, which becomes apparent in the event of unilateral sanctions imposed by states. Lastly, the article proposes additional measures to tackle the risks associated with globally systemic financial infrastructures and their weaponisation.

The full paper can be accessed here.

Anton Didenko is an Associate Professor at the University of New South Wales Faculty of Law & Justice