Financial Technology Law - A New Beginning and a New Future
| Author | George Walker |
| Position | Professor in International Finance Law at the Centre for Commercial Law Studies (CCLS), Queen Mary University London. He is a Barrister and Member of the Honourable Society of Inner Temple and a Member of the New York Bar. |
| Pages | 137-215 |
Financial Technology Law – A New Beginning
and a New Future
G
EORGE
W
ALKER
*
I. Introduction
Banking and financial markets have been subject to significant change in
recent decades. Markets have benefited from substantial advances in all
forms of technological operation including computer hardware and software
capability, massive downsizing in circuitry and processors,
telecommunications speed and efficiency, mobile access, in particular,
through mobile telephony, tablets, and other hand-held devices, and
wearables, and substantial reductions in manufacturing and service costs.
Parallel deregulatory processes in many market sectors including banking,
securities, and insurance as well as telecommunications and media services
have accompanied all of this. Deregulation has substantially increased
capital and investment flows in banking and financial markets which has, in
turn, increased liquidity and reduced borrowing and funding costs
significantly.
International financial markets are nevertheless also still dealing with the
significant costs and impacts of the global financial crisis beginning in
2007–2008. Substantial recent advances in financial technology and
FinTech service and product models have then created important possible
opportunities for growth with increased efficiency and earnings in the
aftermath of the crisis; although, this has also created significant new threats
especially in terms of market and counterparty fragmentation, and
consequent regulatory and supervisory dislocation, disconnection, division,
depletion, and distraction as well as a resource demand and potential skills
deficit.
FinTech has emerged as a powerful new market force as a result of the
coming together of a number of disconnected trends. Significant advances
have occurred in the areas of computer and digital technology, the Internet,
mobile telecommunications as well as economics and finance, which have
transformed traditional areas of study and created important potential new
business structures and operations. The Internet, or World Wide Web
(www),
1
specifically has emerged from two earlier phases of the static Net 1,
* Professor in International Finance Law at the Centre for Commercial Law Studies
(CCLS), Queen Mary University London. He is a Barrister and Member of the Honourable
Society of Inner Temple and a Member of the New York Bar.
1. The Internet forms the underlying network infrastructure that connects computers with
the World Wide Web constituting a specific language based on http (hypertext transfer)
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138 THE INTERNATIONAL LAWYER [VOL. 50, NO. 1
to the interactive Net 2, with the current phase constituting the beginning of
Net 3, or the Value Net or Value Web, and the full realization of the
potential to digitalize and monetize all online banking and financial and
other products and services.
2
Net 4 is expected to follow this, with the
semantic or machine Net,
3
and then the immersive or sensory Net 5.
4
All of
this can be considered to be associated with the emergence of the
digitalization, mobilization, disintermediation, personalization, and
democratization of financial services activities and functions. All industries
will have to become aware of the possibilities of disruptive technology
replacing existing industrial business structures, products, and services.
5
Law and regulation have been sensitive to these changes although slow to
respond to date with no meaningful coherent program constructed to date.
The purpose of this paper is to examine the meaning and nature of
FinTech and other associated terms including regulatory technology
(RegTech), incubators, accelerators and catapults, law technology
(LawTech), electronic banking and finance, digital currencies, and the digital
economy. Market size and location studies are referred to. The FinTech
market is explained in terms of its various sub-sectors and components. The
specific technology underlying distributed ledgers and some of the most
recent developments in digital currencies are also considered. Relative
advantages and disadvantages of this new exciting market area are noted with
a provisional set of comments and conclusions drawn on its current and
potential future value and direction. It has to be stressed that these can only
protocol that allows the sharing of information in a common format. See generally T
IM
B
ERNERS
-L
EE
, W
EAVING THE
W
EB
: T
HE
O
RIGINAL
D
ESIGN AND
U
LTIMATE
D
ESTINY OF
THE
W
ORLD
W
IDE
W
EB BY ITS
I
NVENTOR
(Harper New York 1999).
2. Skinner describes the Value Net in terms of financial markets having moved from paper-
based localized systems to online digital models that allow the transfer of value in real time at
almost zero cost. See generally C
HRIS
S
KINNER
, V
ALUE
W
EB
: H
OW
F
INTECH
F
IRMS ARE
U
SING
M
OBILE AND
B
LOCKCHAIN
T
ECHNOLOGIES TO
C
REATE THE
I
NTERNET OF
V
ALUE
(Marshall
Cavendish Business 2016).
3. This is also referred to as the “internet of things” (IoT) or internet of objects (IoO). The
term was first referred to by Kevin Ashton to refer to inter-connected devices in 1999. Alex
Wood, The Internet of Things is Revolutionising Our Lives, but Standards are a Must, T
HE
G
UARDIAN
(Mar. 31, 2015), https://www.theguardian.com/media-network/2015/mar/31/the-
internet-of-things-is-revolutionising-our-lives-but-standards-are-a-must. Berners-Lee has
referred to Web 3.0 as the Semantic Web, or Linked Data, which involves the development of
common data formats and exchange protocols to allow data transfer between computers and
systems. This is included with Net 4.0 and the machine net for the purposes of this paper. See
Tim Berners-Lee, James Hendler & Ora Lassila, The Semantic Web, S
CIENTIFIC
A
MERICAN
M
AGAZINE
(May 2001), http://www.scientificamerican.com/article/the-semantic-web/.
4. This refers to a further highly personalized stage where people effectively live inside the
Internet. Skinner refers to this as with 4.0 and predicts that it will arrive around 2015. See
generally C
HRIS
S
KINNER
, V
ALUE
W
EB
: H
OW
F
INTECH
F
IRMS ARE
U
SING
M
OBILE AND
B
LOCKCHAIN
T
ECHNOLOGIES TO
C
REATE THE
I
NTERNET OF
V
ALUE
(Marshall Cavendish
Business 2016).
5. See Richard Waters, Media Groups Face up to how Tech Groups Now Call the Shots, F
INANCIAL
T
IMES
(Apr. 14, 2016), http://www.ft.com/cms/s/0/3700057c-0253-11e6-99cb-83242733f755
.html - axzz4Ixwm4pEv.
THE INTERNATIONAL LAWYER
A TRIANNUAL PUBLICATION OF THE ABA/SECTION OF INTERNATIONAL LAW
PUBLISHED IN COOPERATION WITH
SMU DEDMAN SCHOOL OF LAW
2017] FINANCIAL TECHNOLOGY LAW 139
be considered to be pre-emptive and exploratory observations at this stage in
light of the new and fast changing nature of the subject matters covered.
II. Financial Technology and FinTech Language
The substantial growth in FinTech technologies and applications in recent
years has been associated with the emergence of a new technical and media
language. This is in addition to the general digitalization, mobilization,
disintermediation, personalization, and democratization of financial services
activities and functions referred to. FinTech has been associated with a
growth in incubators, accelerators, catapults, and regulatory sandboxes,
which provide different forms of support services for early start-up
companies.
6
Start-up companies are commonly referred to as unicorns, with
an initial market value of over $1 billion, decacorns, with a value of over $10
billion, and most recently hectocorns, with $100 billion. Groups of FinTech
companies are also often referred to in collective terms such as with Fangs,
7
BEGgars,
8
MisFiTS,
9
and BANTs.
10
This is an exciting area of study, although, one in which the limitations of
current language become apparent. A number of new terms, or neologisms,
and specifically syllabic abbreviations on predictive translations,
11
are
6. See E
RNST
& Y
OUNG
, UK F
IN
T
ECH
O
N THE
C
UTTING
E
DGE
A
N
E
VALUATION OF THE
I
NTERNATIONAL
F
IN
T
ECH
S
ECTOR
38 (2015), http://www.ey.com/Publication/vwLUAssets/
EY-UK-FinTech-On-the-cutting-edge/$FILE/EY-UK-FinTech-On-the-cutting-edge.pdf.
7. Facebook (estimated market value $307 billion), Amazon ($250 billion), Netflix ($42
billion), and Google ($503 billion). Apple ($534 billion) may also be included. See, e.g., Julia
Greenberg, The Market Wants Tech Companies to Prove Their Worth, W
IRED
(Jan. 20, 2016),
http://www.wired.com/2016/01/the-market-wants-tech-companies-to-prove-their-worth/. See
F
ACEBOOK
M
ARKET
C
AP
, http://ycharts.com/companies/FB/market_cap; A
MAZON
M
ARKET
C
AP
, http://ycharts.com/companies/AMZN/market_cap; N
ETFLIX
M
ARKET
C
AP
, http://ycharts
.com/companies/NFLX/market_cap; A
LPHABET
M
ARKET
C
AP
, http://ycharts.com/companies/
GOOGL/market_cap; A
PPLE
M
ARKET
C
AP
, http://ycharts.com/companies/APPL/market_cap.
8. See B
OX
M
ARKET
C
AP
, http://ycharts.com/companies/BOX/market_cap; E
TSY
M
ARKET
C
AP
, http://ycharts.com/companies/ETSY/market_cap; G
O
P
RO
M
ARKET
C
AP
, http://ycharts
.com/companies/GPRO/market_cap.
9. See M
ATCH
M
ARKET
C
AP
, http://ycharts.com/companies/MTCH/market_cap; F
IT
B
IT
M
ARKET
C
AP
, http://ycharts.com/companies/FIT/market_cap; T
WITTER
M
ARKET
C
AP
, http://
ycharts.com/companies/TWTR/market_cap; S
QUARE
M
ARKET
C
AP
, http://ycharts.com/
companies/SQ/market_cap.
10. See B
AIDU
M
ARKET
C
AP
, http://ycharts.com/companies/BIDU/market_cap; A
LI
B
ABA
M
ARKET
C
AP
, http://ycharts.com/companies/BABA/market_cap; N
ET
E
ASE
M
ARKET
C
AP
,
http://ycharts.com/companies/NTES/market_cap; T
ENCENT
M
ARKET
C
AP
, http://ycharts
.com/companies/TCTZF/market_cap.
11. See Syllabic Abbreviation, W
ORLD
H
ERITAGE
E
NCYCLOPEDIA
(2002), http://www
.self.gutenberg.org/articles/syllabic_abbreviation. Syllabic abbreviations are words made from
syllables from existing words. Syllabic abbreviations used in this text include TechLaw,
TechReg, BankTech, CoinTech, LoanTech, PayTech, SecTech or TradeTech, InsurTech,
InterTech, GovTech as well as SmartTech for smart contracts, TechRisk and FinRisk, and
FinReg, SuperTech, ResTech, SupTech (or TLR), and the NonNet. Predictive translations are
used to refer to the expected Latin terms for modern areas of law such as lex digitalis, lex
THE INTERNATIONAL LAWYER
A TRIANNUAL PUBLICATION OF THE ABA/SECTION OF INTERNATIONAL LAW
PUBLISHED IN COOPERATION WITH
SMU DEDMAN SCHOOL OF LAW
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