FCA chief executive Nikhil Rathi has warned that the UK risks falling into a “dangerous innovation delta” unless regulators, government and industry adapt more quickly to technological change.
Speaking at the Corporation of the City of London’s annual City Dinner on Thursday night, Rathi said advances in artificial intelligence, digital assets and increasingly round-the-clock markets are creating opportunities for growth, but also new threats to market integrity.
He argued that regulation is struggling to keep pace with innovation, warning that authorities risk being overwhelmed by change rather than shaping it.
“If we maintain an analogue approach in a digital age, new products enter the market faster than we adapt,” Rathi said.
The FCA chief pointed to developments including AI agents, decentralised finance and 24/7 trading as evidence of how rapidly financial services are changing. While the UK is well placed to benefit from these trends, he warned that technological change is also amplifying risks ranging from market abuse and cyber attacks to cross-border financial crime.
Rather than relying solely on new legislation and rulemaking, Rathi said regulators must focus on outcomes and make more effective use of technology and existing powers.
He highlighted the FCA’s growing use of AI tools to help supervisors assess risks and analyse large volumes of data, allowing staff to focus on more complex judgements around market integrity and systemic threats.
Rathi also called for stronger collaboration between regulators, government, law enforcement agencies and industry, arguing that emerging risks increasingly cut across traditional regulatory boundaries.
“No single agency can rise to today’s challenges alone,” he said.
The speech comes as policymakers continue to examine the implications of AI and digital assets for financial services, with Rathi signalling that further work between the FCA and Bank of England on digital asset markets will be set out in the near future.
The regulator’s focus, he added, is ensuring innovation can flourish while maintaining confidence in UK financial markets and supporting economic growth.
