|Kerry Holdings Professor|
Project Description: Finance and technology have always been inextricably intertwined, from the earliest development of money (e.g. coins are a technology which stores value, provides a unit of account and a means of payment) to today’s e-money solutions (from mobile payment to cryptocurrencies). Within that interaction between finance and technology law plays a critical role as it defines the use, limitation and function of money in society.
The 1970s marks the beginning of a change of the relationship between finance, technology and law. The arrival of mainframe computers initiated a process of digitisation of finance, which has only increased ever since with the improvement in computing power, datafication of the financial services industry and availability of analytical tools.
Following the 2008 Global Financial Crisis, a second evolution in the interaction between finance, technology and regulation occurred. It was brought by two factors. First, the arrival of new participants (from start-ups to major technology and communications companies) in financial markets. Second the extremely rapid datafication of society brought by increased mobile phone penetration (5 billion), IoT devices (20 billion) which can be stored and managed on new infrastructure (blockchain and DLT) analysed by tools such as artificial intelligence.
This second phase is now generally identified by the term “FinTech” and has gathered the interest of policymakers, regulators, private sectors and investors in every major financial centre, including Hong Kong. Whilst FinTech development offers many opportunities (i.e. better competition, financial inclusion, economic development) certain risks emerge. In particular where FinTech responds to unmet demands, a new segment on consumer can be at exposed. Furthermore, when FinTech relies on new technological advancements, new unanswered questions emerge (i.e. what of GDPR compliance of distributed data on blockchain).
Hong Kong’s opportunities and risks are compounded by its geographical situation. It's proximity to China and centre place in Asia put’s Hong Kong at the heart of the regions witnessing the most dramatic changes in finance and technology. The tension brought by these changes will reveal (in)adequacies of the law and its role in facilitation the interaction between finance and technology. This opens an opportunity for reform, one which will look at new laws and regulations but also how this can be improved with technology (what the authors refer as Smart Regulation, part of Regtech)
This research project will provide a comprehensive study benefiting the agenda of Hong Kong’s regulators and policymakers in respect to FinTech development. Therefore it will support the city’s ambition to retain its leadership as a financial centre. Given the benchmarking work that will be conducted and Hong Kong’s geographical location at the forefront of change, this work can be exported in other jurisdiction as foresight of what will occur in the future.