New edited Chinese book by Say Goo and Shen Wei on FinTech and Legal Evolution: Credit, Currency, and AI (Shanghai Jiao Tong University)

金融科技與法律變革-信用 貨幣和人工智能 (FinTech and Legal Evolution: Credit, Currency, and AI)
主編(Edited by): 沈偉 (Shen Wei), 吳世學 (Say Goo)
上海交通大學 (Shanghai Jiao Tong University)
出版日期 (Publication date)：March 2025

內容簡介(Description): 以數字為基礎的新技術革命和數字經濟正在改變我們的生活。人工智能、量子計算等高科技正在深度嵌入社會生活，從金融市場到海上船舶，從司法實踐到智慧城市 建設速度之快、規模之廣和介入之深都令人有日新月異、歎為觀止之感。技術與金融相互結合的金融科技改變了貨幣、商業銀行、保險服務、信用體系、證券交易等許多傳統領域的法律面向，對監管提出了更新的要求。本書從監管視角探討金融科技、技術 治理和科技法治的新問題、新視角和新挑戰，揭示技術浪潮對國家治理和法律制度的深刻影響。

Welcome to Dr Menglu Wang, Postdoctoral Fellow

Welcome to Dr Menglu Wang who joined HKU Faculty of Law to be the postdoctoral fellow, under the RGC Senior Research Fellow Scheme (SRFS) project “Digital Finance, Financial Inclusion and Sustainability: Building Better Financial Systems”.

    Dr Menglu Wang is a Post-doctoral Fellow in the Department of Law, the University of Hong Kong. Her research interests include the development and regulation of financial technology (Fintech), with a particular focus on comparative law and Chinese issues. During the postdoctoral period, Menglu will conduct in-depth research on supervisory and regulatory issues relating to digital finance and sustainable development in major Fintech jurisdictions.

     Menglu received her Doctor of Philosophy in Laws from the Chinese University of Hong Kong, and participated in several research projects during her PhD. She holds a master’s degree (with distinction) from the University of Sydney Business School, specializing in finance and business law. Menglu passed the national judicial examination in China and obtained the legal professional qualification certificate.  Her research areas include:

• Commercial Corporate and Financial Law
• Comparative Chinese Law
• Information Technology

HKU Research Awards in the Law Faculty in 2021-2022

Kerry Holdings Professor in Law Douglas Arner Awarded Outstanding Researcher Award

Congratulations to Kerry Holdings Professor in Law Douglas Arner who is the 2021-2022 award recipient of the Outstanding Researcher Award (ORA), in the Faculty of Law, awarded by The University of Hong Kong.  He is also  the recipient of  RGC Senior Research Fellow in 2020, Finalist for edX Prize in 2020, and Outstanding Young Researcher Award in 2007.   Currently, he is the Kerry Holdings Professor in Law, as well as the Director of LLM in Compliance and Regulation, and LLM in Corporate and Financial Law, and Law, Innovation, Technology and Entrepreneurship (LITE) Programmes, and is the former Director of the Asian Institute of International Financial Law at the University of Hong Kong, . He served as Head of the HKU Department of Law from 2011 to 2014 and as Co-Director of the Duke University-HKU Asia-America Institute in Transnational Law from 2005 to 2016. Douglas has published eighteen books, including most recently The RegTech Book (Wiley 2019), and Reconceptualising Global Finance and its Regulation (Cambridge 2016); Financial Markets in Hong Kong: Law and Practice (Oxford, 2d ed., 2016), Finance in Asia: Institutions, Regulation and Policy (Routledge 2013), From Crisis to Crisis: The Global Financial Crisis and Regulatory Failure (Kluwer 2011) and Financial Stability, Economic Growth and the Role of Law (Cambridge 2007), and more than 200 articles, chapters and reports on international financial law and regulation. His recent papers are available on SSRN at https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=524849, where he is among the top 75 authors in the world by total downloads. Douglas led the development of Introduction to FinTech – launched with edX in May 2018 and now with over 80,000 learners spanning every country in the world. He is a Senior Visiting Fellow of Melbourne Law School, University of Melbourne, and an Advisory Board Member of the Centre for Finance, Technology and Entrepreneurship (CFTE). Douglas was an inaugural member of the Hong Kong Financial Services Development Council (2013-2019) and has served as a consultant with, among others, the United Nations, World Bank, Asian Development Bank, APEC, Alliance for Financial Inclusion, and European Bank for Reconstruction and Development. He has lectured, co-organised conferences and seminars and been involved with financial sector reform projects around the world. He is currently leading a major 5 year Hong Kong Research Grants Council Senior Research Fellowship project on the role of FinTech and RegTech in financial inclusion and the UN Sustainable Development Goals as well as a 4 year RGC Research Impact Fund project focusing on FinTech policy and regulation. From 2012-2018, Douglas served as Project Coordinator of a major five-year project funded by the Hong Kong Research Grants Council Theme-based Research Scheme on “Enhancing Hong Kong’s Future as a Leading International Financial Centre”. He is currently one of the core team of another TRS project focusing on digital finance, financial stability and financial inclusion.  He has been a visiting professor or fellow at Duke, Harvard, the Hong Kong Institute for Monetary and Financial Research, IDC Herzliya, McGill, Melbourne, National University of Singapore, University of New South Wales, Shanghai University of Finance and Economics, and Zurich, among others. 

     Click here to view more on  Kerry Holdings Professor in Law Douglas Arner's work.

Dr Angela Zhang Awarded Outstanding Young Researcher Award

Congratulations to Dr Angela Zhang who is the 2021-2022 award recipient of the Outstanding Young Researcher Award (OYRA) in the Faculty of Law, awarded by The University of Hong Kong. She won the Research Output Prize in 2019, in the Faculty of Law, awarded by The University of Hong Kong, for her scholarly work entitled “The Role of Media in Antirust: Evidence from China,” (2018) 41 Fordham International Law Journal 473-530.

     Currently, she serves as Director of the Philip K. H. Wong Centre for Chinese Law at the University of Hong Kong, which promotes legal scholarship with the aims of developing a deeper understanding of China and facilitating dialogue between East and West.  She is an associate professor at the Faculty of Law in the University of Hong Kong. An expert in Chinese law, Angela has written extensively on Chinese regulatory issues. Her first book Chinese Antitrust Exceptionalism garnered significant attention during Beijing’s crackdown on Chinese Big Tech and was named a Best Political Economy Book of the Year by ProMarket in 2021. Angela is now working on her second book about China’s model of regulatory governance, which is expected to be released in 2023.

            With a broad research interests in the areas of law and economics, particularly in transnational legal issues bearing on businesses, she as a young researcher has massive research outputs appearing in leading international law reviews such as Harvard International Law Journal, Yale International Law Journal, Stanford International Law Journal, as well as top peer-reviewed journals from other disciplines such as Management Science and China Quarterly.

          She is a four-time recipient of the Concurrence Antitrust Writing Award, which selects the best articles published globally in the field of antitrust law each year. She received a British Academy/Leverhulme Small Research Grant (£10,000) in 2014 and two Hong Kong GRF grants, one (HK$637,440) in 2018 and the other (HK$ 656,825) in 2021.

      She is a highly sought-after commentator on Chinese regulatory issues. She often speaks at prestigious antitrust conferences in the United States, Europe, and Asia. She is also frequently interviewed by major international media outlets and regularly contributes commentaries to the popular press.

     Click here to view more on Dr Angela Zhang's work.

Thomas Cheng Awarded Research Output Prize

Congratulations to Thomas Cheng who is the 2021-2022 award recipient of the Research Output Prize  (ROP) in the Faculty of Law, awarded by The University of Hong Kong. The research output prize was for his book, The Patent-Competition Interface in Developing Countries, published by Oxford University Press, in 2021 (544pp). 

     Currently, he is a Professor in the Faculty of Law at the University of Hong Kong, who has written extensively on competition law in developing countries and on the competition law of a number of Asian jurisdictions, including Hong Kong, China, and Japan. His research has appeared in respected specialist U.S. journals, including Chicago Journal of International Law, Berkeley Business Law Journal, Virginia Law & Business Review, and University of Pennsylvania Journal of Business Law, and in leading competition law journals such as Journal of Antitrust Enforcement and World Competition. In 2020, he published Competition Law in Developing Countries, with Oxford University Press. 

     His research has been recognized internationally. He has been twice awarded the Jerry S. Cohen Memorial Fund Writing Award in the vertical restraints and antitrust and IP categories. Apart from awards, his stature as a scholar has been recognized through appointments to the executive and advisory boards of a number of leading international competition law organizations such as the American Antitrust Institute and the Academic Society for Competition Law (“ASCOLA”). He has made critical contributions to the development of competition law in Hong Kong. He advised the government extensively during the drafting of the city’s first competition law. He was a member of the inaugural Competition Commission and played a pivotal role in staff recruitment and setting up the Commission.

Welcome to Dr Jamieson Kirkwood, PDF in Finance, Technology, Regulation and Sustainable Development

Welcome to  Dr Jamieson Kirkwood who recently joined HKU Faculty of Law as a post-doctoral fellow in Finance, Technology, Regulation and Sustainable Development.  Jamie completed his PhD at the Chinese University of Hong Kong and spent over 10 years practicing as an inhouse counsel with several multinational corporations. He is also Called to the Bar in England & Wales. 

   Jamie specialises in international economic law, regulation and development, financial law & technology and digital dispute resolution. He wrote his PhD thesis on the settlement of disputes arising within China’s Belt and Road Initiative. Whilst at CUHK, Jamie published several related articles and was awarded the prestigious Postgraduate Research Award 2020 from CUHK in recognition of his hard work.

    Currently Jamie is researching under the guidance of Professor Douglas Arner, recipient of a Hong Kong Research Grants Council Senior Research Fellowship for his project on the role of FinTech and RegTech in financial inclusion and the UN Sustainable Development Goals, as well as a 4 year RGC Research Impact Fund project focusing on FinTech policy and regulation.

     Jamie’s most recent publication (co-author with Professor Julien Chaisse of City University of Hong Kong) is Chaisse, Julien and Kirkwood, Jamieson, ‘Smart Courts, Smart Contracts, and the Future of Online Dispute Resolution’ (2022) 5(1) Stanford Journal of Blockchain Law & Policy 62-91, accessible at https://stanford-jblp.pubpub.org/pub/future-of-odr/release/1.

Emily Lee on De-risking Practices in Hong Kong and Technological Responses (Common Law World Review)

"Technology-driven solutions to banks’ de-risking practices in Hong Kong: FinTech and blockchain-based smart contracts for financial inclusion"
Emily Lee
Common Law World Review, 
Published on 18 May 2022

Abstract:   This article examines banks’ de-risking practices inside Hong Kong's Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime, a problem that has created considerable tension between the demands of AML/CFT prevention and those of financial inclusion. It unravels the public policy tensions stemming from a multitude of financial reform causes, namely the facilitation of AML/CFT regulatory compliance, the promotion of financial technology (FinTech) innovation and an ultimate expansion in financial inclusion. The article argues that tiered account services are an important first step towards financial inclusion, culminating in the introduction of simple bank accounts by some banks to mitigate the effect of de-risking. While proposed solutions such as the know-your-client utility system and central data repository may contribute to a digital financial inclusion framework, they are not tailored to solve a specific problem (de-risking). The article therefore proposes and evaluates whether FinTech and blockchain-based smart contracts qualify as alternative solutions to de-risking. The article aims to address those policy tensions and contribute to the regulatory policy formulation and the rule-making for financial law and regulation intended to facilitate financial inclusion.

New Book by Syren Johnstone: Rethinking The Regulation of Cryptoassets (Edward Elgar)

Rethinking the Regulation of Cryptoassets: Cryptographic Consensus Technology and the New Prospect

(Rethinking Law series)

Syren Johnstone

Edward Elgar Publishing

Publication Date: September 2021

328 pp

Description: This thought-provoking book challenges the way we think about regulating cryptoassets. Bringing a timely new perspective, Syren Johnstone critiques the application of a financial regulation narrative to cryptoassets, questioning the assumptions on which it is based and whether regulations developed in the 20th century remain fit to apply to a technology emerging in the 21st.

Review:

‘Prof. Johnstone’s book on the regulation of cryptoassets forces us to think twice about the way we try to regulate the digital economy. He challenges the habit of the regulators to push new disruptive ideas and instruments into old frames and concepts, and invites them to move out of their comfort zone. Rethinking the Regulation of Cryptoassets is a complete account of the challenges we face in developing a crypto-economy and proposes a coherent and sustainable regulatory framework that ensures both market efficiency and technological relevance.’ – Eva Kaili, Chair of the STOA Committee, Rapporteur of the Blockchain Resolution of the European Parliament, Brussels

‘Cryptographic consensus technology presents extraordinary market opportunities but also raises a host of vexing regulatory challenges. Rethinking the Regulation of Cryptoassets maps this complex terrain and charts a way forward, offering a novel approach to the regulatory enterprise to protect against abuses while fostering innovation. Johnstone brings considerable legal, financial, and technological sophistication to the task, and his analysis is at once rigorous and accessible. This book will become essential reading on the future of cryptoassets.’ – Christopher Bruner, University of Georgia, School of Law, US

‘The crypto industry moves fast and requires regulatory frameworks that can cater to that pace. Prof. Johnstone brings forward a number of ideas that are worth reflecting on as cryptoassets are definitely here to stay.’  – Henri Arslanian, Global Crypto Leader and Partner, PwC

‘Johnstone provides a refreshing way to think about the regulatory limits of applying the standard financial narrative to a technology that is globally programmable but locally valuable. His DBA (Determined-By-Architecture) framework may help align regulation with the borderless possibilities of mathematics.’ – Pindar Wong, Chairman, VeriFi (Hong Kong) Ltd

Douglas Arner et al on Decentralized Finance (Journal of Financial Regulation)

"Decentralized Finance"
Dirk A Zetzsche, Douglas W Arner, Ross P Buckley
Journal of Financial Regulation, Volume 6, Issue 2, pp.  172–203
Published in September 2020

Abstract: DeFi (‘decentralized finance’) has joined FinTech (‘financial technology’), RegTech (‘regulatory technology’), cryptocurrencies, and digital assets as one of the most discussed emerging technological evolutions in global finance. Yet little is really understood about its meaning, legal implications, and policy consequences. In this article we introduce DeFi, put DeFi in the context of the traditional financial economy, connect DeFi to open banking, and end with some policy considerations. We suggest that decentralization has the potential to undermine traditional forms of accountability and erode the effectiveness of traditional financial regulation and enforcement. At the same time, we find that where parts of the financial services value chain are decentralized, there will be a reconcentration in a different (but possibly less regulated, less visible, and less transparent) part of the value chain. DeFi regulation could, and should, focus on this reconcentrated portion of the value chain to ensure effective oversight and risk control. Rather than eliminating the need for regulation, in fact DeFi requires regulation in order to achieve its core objective of decentralization. Furthermore, DeFi potentially offers an opportunity for the development of an entirely new way to design regulation: the idea of ‘embedded regulation’. Regulatory approaches could be built into the design of DeFi, thus potentially decentralizing both finance and its regulation, in the ultimate expression of RegTech.

Emily Lee on Digital Financial Inclusion: Observations and Insights from Hong Kong's Virtual Banks (Law and Contemporary Problems)

"Digital Financial Inclusion: Observations and Insights from Hong Kong's Virtual Banks"

Emily Lee
Law and Contemporary Problems
2021, Issue 84, pp. 95-113

Abstract: This Article examines issues affecting virtual banks, specifically those issues related to the financial technology (fintech) disruption and dealing with alternative banking and finance. It covers an expansive interpretation of Hong Kong regulatory law regarding the requirements for the authorization of virtual banks, with an accompanying study and critique of the financial industry’s collection and storage of digital data in relation to privacy, drawing inspiration from international norms. It then discusses those regulations in terms of their effect on digital financial inclusion. Finally, it evaluates some potential challenges facing fintech lenders, virtual banks included, in a regulatory environment that promotes digital financial inclusion while seeking to manage financial consumerism. This Article adds to the literatures of banking, finance, information technology management, and consumer protection law enforcement by analyzing the latest digital financial inclusion developments in Hong Kong, following the Hong Kong Monetary Authority’s (HKMA) issuing of virtual bank licenses in 2019 in an effort to promote financial inclusion and fintech innovation.

     This Article focuses on the connection between financial inclusion and digital financial inclusion as it assesses the role of virtual banks in Hong Kong’s financial inclusion agenda because this connection may be key to virtual banks’ success. This Article undertakes the original contribution of examining why Hong Kong’s inflexible capital requirement, unclear demands on digital banking innovation, and outdated laws against technical risks may render its financial inclusion policy less effective.

Buckley, Arner, Zetzsche & Selga on TechRisk (Singapore Journal of Legal Studies)

"TechRisk"
Buckley, Ross P., Arner, Douglas W., Zetzsche, Dirk A., Selga, Eriks K.
Singapore Journal of Legal Studies

March 2020, pp 35-62

Abstract: Fintech is now defined by a long-term, global process of digitisation of finance, increasingly combined with datafication and new technologies including cloud computing, blockchain, Big Data and artificial intelligence. Cybersecurity and technological risks are thus evolving into major threats to financial stability and national security. This trend has been magnified by the COVID-19 crisis which has heightened dependence on digital technologies and seen substantial parts of the population working from home through systems of questionable security. Additionally, the entry of BigTech firms brings two new issues. The first arises with new forms of potentially systemically important infrastructure. The second arises because data--like finance--benefits from economies of scope and scale and from network effects and--even more than finance--tends towards monopolistic or oligopolistic outcomes. This leads to potential systematic risk from new forms of "Too Big to Fail" and "Too Connected to Fail" phenomena. We suggest some basic principles about how to address this entire range of risks.

Douglas Arner Discusses the Ant Group IPO Failure, FinTech 4.0 and the Effects of Covid-19 on Digital Finance (Video & Podcast)

Video - Looking Back Looking Forward: Ant Group & Global Digital Finance Platforms by Professor Douglas Arner

 

Summary: In this episode of Looking Back Looking Forward - the last of 2020 - Professor Douglas Arner discusses how COVID-19 has driven digitisation of finance to new levels, marking the emergence of FinTech 4.0. In finance, the impact of COVID-19 on digitisation can be seen in dramatic increases in e-commerce and digital communications, with particularly dramatic increases in: 1) electronic payment and digital currencies; 2) regulatory technology (RegTech); 3) non face-to-face transactions, and 4) data and concentration. FinTech 4.0 is characterised by the emergence of increasingly dominant digital finance platforms benefiting from network effect and economies of scope and scale while integrating finance and technology. The best example is China's Ant Group and the dramatic halt of its IPO - which would have been the world's largest - by Chinese regulators in November 2020 as a result of the fact that these platforms bring not only benefits but also huge new risks and concerns. 

     These concerns and possible approaches are highlighted in a new paper: 'Digital Finance Platforms: Toward a New Regulatory Paradigm', available at: https://papers.ssrn.com/sol3/papers.c... For more information on the University of Hong Kong's financial technology programme, visit http://www.hkufintech.com and discover the transformation of information technology's ever-growing impact on finance.

      Listen to the Podcast - All you need to know about Ant Group (and its canceled IPO) by Professor Douglas Arner. Arner joins the Fintech Beat podcast to talk about the origins of Ant Group, its regulatory shortcomings in the Chinese financial system, and when he expects to see an IPO. The paper 'Governing Global Digital Finance', available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3678518​ projects the background of both the video and the podcast.

International Conference: Data Sovereignty along the Digital Silk Road (6-7 Jan 2021 on Zoom)

Data Sovereignty along the Digital Silk Road

Date: January 6 – 7, 2021 (Wednesday – Thursday)

Time: 8am – 12pm (US Eastern Standard Time)

This conference is co-organized by the Law and Technology Centre of the University of Hong Kong Faculty of Law and the Institute for Technology Law & Policy of the Georgetown University Law Center. It will be conducted via Zoom and prior registration is required. More information is available from the conference website: https://www.datasovereignty.hku.hk/.

Keynote Speakers:
Frank Pasquale, Professor of Law, Brooklyn Law School
Mark Wu, Henry L. Stimson Professor and the Vice Dean for the Graduate Program and International Legal Studies, Harvard Law School

Panel Speakers & Moderators:

Susan Aaronson, Research Professor & Director of the Digital Trade and Data Governance Hub, George Washington University Elliott School of International Affairs

Douglas Arner, Kerry Holdings Professor in Law, University of Hong Kong Faculty of Law

Mira Burri, Managing Director Steering Committee Internationalisation (SCI) & Senior Lecturer, University of Lucerne Faculty of Law

Anupam Chander, Professor of Law, Georgetown University Law Center

Anne Cheung, Professor of Law & Co-Director of the Law and Technology Centre, University of Hong Kong Faculty of Law

Théodore Christakis, Professor of International and European Law, Université Grenoble Alpes

Julie Cohen, Mark Claster Mamolen Professor of Law and Technology, Georgetown University Law Center

Jennifer Daskal, Professor of Law & Faculty Director, Tech, Law & Security Program, American University Washington College of Law

Henry Gao, Associate Professor of Law, Singapore Management University School of Law

Graham Greenleaf, Professor of Law & Information Systems, Faculty of Law, University of New South Wales

Lizhi Liu, Assistant Professor, Georgetown University‎ McDonough School of Business

Neha Mishra, Lecturer in Law, Australian National University

Kyung-Sin Park, Professor of Law, Korea University Law School; Open Net Korea

Shin-yi Peng, Distinguished Professor of Law, National Tsing Hua University

Thomas Streinz, Adjunct Professor of Law & Executive Director, Guarini Global Law & Tech, New York University School of Law

Haochen Sun, Associate Professor of Law, University of Hong Kong Faculty of Law

Dan Svantesson, Professor of Law & Co-Director, Centre for Commercial Law, Bond University Faculty of Law

Andrew Woods, Professor of Law, University of Arizona College of Law

All are welcome! Please register as soon as possible at https://docs.google.com/forms/d/1WARJ4wtlnSmJR_hR9vVfc6sNS9eGzY-K70env7Dskys/viewform?edit_requested=true. . The link to the Zoom webinar will be provided upon successful registration.

Please direct any inquiries to Ms. Grace Chan at mcgrace@hku.hk or (+852) 3917 4727.

Douglas Arner et al on Stablecoins: Risks, Potential and Regulation (BIS Working Paper)

"Stablecoins: risks, potential and regulation"
Douglas Arner, Raphael Auer and Jon Frost
BIS Working Papers No 905
November 2020

Abstract: The technologies underlying money and payment systems are evolving rapidly. Both the emergence of distributed ledger technology (DLT) and rapid advances in traditional centralised systems are moving the technological horizon of money and payments. These trends are embodied in private “stablecoins”: cryptocurrencies with values tied to fiat currencies or other assets. Stablecoins – in particular potential “global stablecoins” such as Facebook’s Libra proposal – pose a range of challenges from the standpoint of financial authorities around the world. At the same time, regulatory responses to global stablecoins should take into account the potential of other stablecoin uses, such as embedding a robust monetary instrument into digital environments, especially in the context of decentralised systems. Looking forward, in such cases, one possible option from a regulatory standpoint is to embed supervisory requirements into stablecoin systems themselves, allowing for “embedded supervision”. Yet it is an open question whether central bank digital currencies (CBDCs) and other initiatives could in fact provide more effective solutions to fulfil the functions that stablecoins are meant to address. Click here to download the full paper.

Syren Johnstone on Exploring the Impact of Regulations on the Crypto-Asset Space (OAX Foundation)

"Exploring the Impact of Regulations on the Crypto-Asset Space"

Syren Johnstone

OAX Foundation

12 November 2020

How Financial Regulation Has Altered The Crypto-Asset Landscape

Over the last few years I’ve been writing on this topic I’ve found myself asking three questions. Where is the regulation of crypto-assets heading? What are the implications of that direction for development of the technology? Are there alternatives?

Directions

In July 2017, things changed. The U.S. SEC had identified The DAO as an investment contract subject to securities laws. Although the U.S. CFTC had indicated in 2015 it regarded Bitcoin as subject to commodities laws, the SEC’s report was the marker buoy that chartered a new course. By early 2018 everyone from the BIS, to the FSB to the IMF were assembling their views on the growing interactions with the global financial system. ICOs morphed into STOs. Jurisdictions started thinking about their own laws: apply, develop or expand.

     Policy-makers had few other tools than to apply financial regulation. The adoption of an incrementalist approach based on pre-existing regulatory constructs resulted in “fit-to-existing-regulation” (FER) taxonomies that fitted all crypto-assets into existing regulatory silos. Problem solved.

   Except it wasn’t. Tokens could take on different characteristics at different times, or could simultaneously fit into all FER categories. Various premises of securities regulation don’t apply particularly well to crypto-assets. This ranges from assumptions about accountability and institutional arrangements to the utility of product siloing and how markets can be regulated. Labelling a token as a security doesn’t mean that granular rules developed for traditional securities can be sensibly applied. While questions must be asked about the sustainability of applying securities regulation, regulatory bodies globally have set a course that applies the language and strategies of FER taxonomies and the securities market to crypto-assets.

Implications

The shift to STOs changed the way technologists raise development capital. But it also had an impact on the development of the technology itself because it represents a significant redesign of the notion of a token – what it is, does or might one day be capable of doing. The SAFT structure might have been a workaround but now looks untenable.

     Applying securities law reinforced the traditional corporatized relationship, and centralized barrier, between an issuer and the providers of capital whose interests become limited to the prospect of a financial return. It may also have inadvertently bolstered an existing interest in crypto-assets as speculative investments. Certainly, the much broader concept of disintermediated economics has been shifted to the production of an array of essentially financial products built around a financial capital model, as witnessed by the growth of DeFi.

     Consequently, other uses of the technology that have been proposed or thought of lag in terms of development and implementation. The deficiency of exploration leaves an almost existential uncertainty about the wholly different business models that may be possible. For example, such as those that might be built around open data networks that promote shared value creation - because the underlying network is an open database that anyone can build on, value is primarily created from products and services that do not rely on exclusively owned proprietary data protected by intellectual property laws.

    This has had an obvious effect on ecosystem development. Non-financial iterations of the technology face survival challenges in an environment that is determined by the prevailing political, economic and regulation infrastructure, which is heavily coloured by extant financial frameworks... Click here to read the full text. 

Syren Johnstone Interviewed on Tightening Regulation of Crypto Assets and Exchanges (Cointelegraph)

"FUD or regulatory change? Rumor clouds swirl around crypto exchanges"

Andrew Singer

Cointelegraph

9 November 2020

The mood of fear, uncertainty and doubt, otherwise known as FUD, that has gripped some of the largest cryptocurrency exchanges since October heightened last week — and it had nothing to do with the United States presidential election.

...

An increasing likelihood of enforcement?

But maybe there is a method to all this “FUDiness.” Syren Johnstone, who is executive director of the compliance and regulation program at the University of Hong Kong and has written about regulating crypto exchanges, suggested to Cointelegraph that the global regulatory pendulum is swinging in the direction of tighter control:

“In Hong Kong the government this week proposed to bring all crypto-assets under the oversight of the securities regulator by using money laundering concerns as the stepping stone. Legislation has been proposed in the EU and the U.S. that drives crypto-assets into existing regulatory silos. These actions indicate the wind has definitely changed direction — [while] strengthened regulatory mandates increases the likelihood of enforcement.”

...  Click here to read the full text.

HKU-SCF FinTech Academy Awarded “Best Governance, Risk and Compliance Solution“ in TechChallenge 2020

Congratulations to Professor Douglas Arner, Mr Brian Tang, and other teammates from Standard Chartered and HKU-SCF FinTech Academy on winning the Award for Best Governance, Risk and Compliance Solution in the inaugural “TechChallenge - Digitising Trade Finance” (TechChallenge).  The team proposed TradePro, a machine-learning model for trade finance inclusion for SMEs using internal and external datasets.  Recognition also goes to Dr Giuliano Costellano, who was a member of the Kozolchyk National Law (NatLaw) team shortlisted for the same problem challenge.

     Launched in August 2019, TechChallenge is a joint initiative of the BIS Innovation Hub and the Hong Kong Monetary Authority, designed to showcase the potential for new innovative technologies to resolve problems in trade finance (TradeTech). Winners were selected from 103 technology solutions submitted by applicants worldwide to three problem statements: (1) Connecting Digital Islands and Increasing Network Size and Effects; (2) Trade Finance Inclusion for SMEs; and (3) TradeTech for Emerging Markets. Besides the best solution to each of the problem statement, other awards were made to recognize outstanding solutions in different aspects. All 17 winners and runners-up were invited to showcase their submissions at the Hong Kong Fintech Week, which ran as a virtual event on 2-6 November 2020.  For more information, see the BIS's press release statement (2 November 2020) and the TechChallenge Showcase for the names of all the winners, runners-up and shortlisted participants.

Douglas Arner et al on the Evolution and Future of Data-Driven Finance in the EU (Common Market Law Review)

"The Evolution and Future of Data-Driven Finance in the EU"

Zetzsche Dirk, Douglas Arner, Ross Buckley, Rolf H. Weber

Common Market Law Review, Issue 57, pp. 331-360
published in 2020

Abstract: Europe’s path to digitization and datafication in finance rests on four pillars: (1) extensive reporting requirements imposed after the global financial crisis to control systemic risk and change financial sector behaviour; (2) strict data protection rules reflecting European concerns about dominant actors in the data and technology industries; (3) the facilitation of open banking to enhance competition in banking and payments; and (4) systems for digital identification for individuals and legal entities designed to further the Single Market and enhance financial integrity and transparency. The article analyses these pillars and suggests that - together - they are triggering a transition to data-driven finance and will underpin the future of digital financial services in the EU. The pillars bolster an emerging ecosystem which aims to promote a balance among a range of sometimes conflicting objectives, including systemic risk, data security and privacy, efficiency, customer protection, and market integrity. As well as supporting digital financial transformation in Europe, the EU experiences provide important insights for other societies in developing regulatory approaches to the intersection of data, finance and technology.

Syren Johnstone on Fintech Regulation in Asia (new book chapter)

"Fintech regulation in Asia"

Syren Johnstone 

in Cian, M. and Sandei, C (eds),  Dritto del Fintech (Kluwer, 2020),  Part IV, pp. 699-714

Introduction: All major jurisdictions within the Asia region, as with other regions globally, have recognized the importance of Fintech to the development of its financial markets. Earlier chapters of this book have well recited the advantages of Fintech, and the associated risks, and these are also common to the Asian context and need not be repeated here. The approach to regulation in Asia has been diverse owing to different political, legal and cultural considerations in each jurisdiction. By way of broad characterization, while the efficiencies that Fintech solutions bring to traditional financial services have been a primary objective of regulatory facilitation throughout Asia, the emergence of digital assets and the primary and secondary markets that have evolved around them has been an object of concern and caution. Accordingly, the region has been active in developing specific laws and regulations related to e-money payment systems and financial services, while adopting a conservative risk-based approach to financing activities that tap the public capital market via digital assets. As to the latter, the larger capital markets of North Asia have been of interest to watch as developments have ranged from more permissive industry-regulator partnering to develop more granular regulation (Japan), to cautious approaches that tend to follow the United States model of openly permitting industry development while applying existing laws where possible (Hong Kong), to banning specific classes of activity while also promoting technology including blockchain (Mainland China).

Zetzsche, Buckley & Arner on "Regulating LIBRA" (SSRN)

"Regulating LIBRA: The Transformative Potential of Facebook’s Cryptocurrency and Possible Regulatory Responses"

Dirk A. Zetzsche, Ross P. Buckley, Douglas Arner

European Banking Institute Working Paper Series 2019/44, 
University of New South Wales Law Research Series UNSWLRS 19-47

SSRN, 11 July 2019

Abstract: Libra is the first private cryptocurrency with the potential to change the worldwide payment and monetary system landscape. Due to the scale and reach provided by its affiliation with Facebook, the question will be not whether, but how, to regulate it. This short paper introduces the Libra project and analyses the potential responses open to regulators worldwide. Click here to download the papper, which has already received attention by the BBC online news, see Chris Baraniuk, "Libra: Could Facebook’s new currency be stopped in its tracks?" 13 August 2019.

SuperCharger on List of "100 Startup Accelerators Around the World" (Crunchbase)

Congratulations to our PhD student, Janos Barberis (supervisor: Douglas Arner), whose accelerator Supercharger, has made Crunchbase's Top 100 Startup Accelerators ("100 Startup Accelerators Around the World You Need to Know About", 8 Aug 2019). According to Crunchbase's Jeremy Brown, "accelerators enable ambitious individuals to increase their chances of building a successful business" and "[s]ome of the most well-known tech companies in the world, including several unicorns, went through startup accelerators at some point in their existence". Supercharger was one of three Hong Kong accelerators listed and described as follows:

The SuperCharger is a FinTech accelerator program dedicated to both startups and more established global companies aiming to capture the Asian growth market. They are sponsored by Standard Chartered Bank, Chinese online giant Baidu, and coworking space operator TusPark Global Network, which has produced 19 IPOs through its accelerator programs.

Barberis founded Supercharger in 2016 and its mission is "to find, train and scale the next generation of change-makers by accelerating the pace of change of business and developing human capital."

New FinTech Regulation and Policy Project Funded by RGC's Research Impact Fund (PI: Douglas Arner, HKU Law, HK$4.3M)

Kerry Holdings Professor

Congratulations to Professor Douglas Arner who is leading a research project recently awarded HK$4.3 million (including $1.3 million matching by HKU) from the Research Grants Council's new Research Impact Fund 2018/19. The title of the project is Balancing the Opportunities and Risks of Financial Technology: FinTech Regulation and Policy.  The team members of this international and interdisciplinary project include Ross Buckley from the University of New South Wales, David C. Donald from Chinese University of Hong Kong, George Q. Huang from HKU (Business & Economics), Chen Lin from HKU (Business & Economics), Siuming Yiu from HKU (Computer Science), and Dirk A. Zetzsche from the University of Luxembourg.

  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.