Balancing the Opportunities and Risks of Financial Technology: FinTech Regulation and Policy

Professor Arner, Douglas Wayne   (Project Coordinator (PC))

Professor Donald David C.   (Co-Investigator)

Professor Lin Chen   (Co-Investigator)

Professor Huang George Q   (Co-Investigator)

Professor Yiu Siu Ming   (Co-Investigator)

Professor Buckley Ross P   (Co-Investigator)

48

2019-04-01

4207974

Balancing the Opportunities and Risks of Financial Technology: FinTech Regulation and Policy

artificial intelligence, blockchain, financial technology, FinTech, internet of things

LawOthers - relating to Business Studies

R7054-18

Research Impact Fund (RIF)

2018

Completed

Technology is transforming finance and its regulation across the world. This project will analyse regulatory and legal approaches to financial technology (FinTech) in leading jurisdictions, drawing implications for financial law and regulation in Hong Kong. Our project builds on work emerging from a recently completed RGC Theme-based Research Scheme project on Enhancing Hong Kong’s Future as a Leading International Financial Centre. The project brings together world class experts in financial law and regulation (Arner, Buckley, Donald, Zetzsche) with experts on finance (Lin) and emerging technologies (Huang, Yiu). The new challenges to theory and policy in FinTech show why new thinking needs to lead to new policies for Hong Kong, as a competitive international financial centre, and elsewhere. Focusing on issues identified in earlier work, our team will study the legal and regulatory challenges of FinTech in Hong Kong, focusing on three major technologies and their implications, namely: (1) distributed ledger technology (DLT) and Blockchain; (2) Big Data and artificial intelligence (AI), particularly their relation to digital reporting and compliance; (3) mobile internet and cloud, particularly in the context of cybersecurity and data protection; and (4) biometrics and digital identification, particularly as they relate to know your customer (KYC) systems and access to finance. Underlying the project will be the overall objective of identifying legal and regulatory reforms in Hong Kong to support competitiveness as an international financial centre while at the same time balancing the objectives of financial stability, financial inclusion, market integrity and consumer protection. In Phase I, we will analyse existing policy approaches to FinTech regulation in major jurisdictions. We will review the rulemaking – and initial impact – in FinTech leaders, including Mainland China, India, Singapore, Australia, Switzerland, EU, UK and US. We also look at the effects of recommendations by international regulatory organisations, including the Financial Stability Board, International Organisation of Securities Commission (IOSCO), the International Monetary Fund and others on the emerging consensus around FinTech policy. Such work will generate a map of FinTech rules, their direct effects on the financial services industries and indirect effects on financial centre competitiveness. These results should form the basis of rethinking the standard theories of financial markets and regulation, and a possible empirical basis for future analysis. This process will include –where possible – input into these processes. With a firm grasp of the newly emerging FinTech markets and legal principles, Phase II will compare Hong Kong’s practice and legislation/regulation with these other jurisdictions, focusing the legal and regulatory reforms necessary in Hong Kong to best support and facilitate in a responsible manner our four core areas/technologies. Law and regulation trails technology everywhere and such a strategic approach will be significant as financial transformation impact on financial centres around the world. Phase III involves bringing our analysis to Hong Kong’s market participants, regulators and our own peers. We will organise small group meetings with major representatives of Hong Kong’s financial and regulatory community, as well as a larger 2 day event. Through feedback and discussion, we will refine our analysis – adding much of the qualitative richness of practice in Hong Kong. Such extensive discussions will also allow us to draft a policy paper to submit to the FSDC and Hong Kong’s regulators. Such work will also consist of presentations at the international organizations we cited above. By Phase V, we will have the analytical work and market reaction needed to conduct in-depth study of each of the 4 technologies and regulatory questions, forming the basis of a series of publications. Phase VI will tie everything together, in the form of a major book on the changes needed to legal and regulatory systems in Hong Kong and elsewhere in supporting FinTech and RegTech.