Digital Finance and Regulatory Competition

International Banking and Finance Law Series#39
Digital Finance and Regulatory Competition
Regulating Distributed Ledger Technology-Based Financial Products and Services
Lucien J. van Romburg

Governments, like people, compete against each other but do so in a bid to achieve their myriad socio-economic and political aims. In the operation of regulatory competition, governments may create rules with the intent of attracting capital and labour to their domains. In the twenty-first century, regulatory competition takes on a new dimension in the face of the rapid advancement of digital finance. The role of financial technology (fintech) as a tool through which governments achieve their aims cannot be overstated. The proliferation of distributed ledger technologies (DLT) marked a watershed moment for technological advancement and presented a ripe opportunity for governments to defend their competing claims for resources.
In this context, this book tackles the question of whether the world's leading financial centres - Hong Kong, London, and New York - engaged in regulatory competition against each other through their creation of rules to govern DLT-based financial products and services during the period 2008 until 2022. In answering this question, this book provides a cohesive framework for understanding the influence of regulatory competition on rule creation using a narrative lens based on a comparative study of legal, regulatory, and policy instruments. The lessons distilled from the analysis provide reasoned observations on the potential implications for the future regulation of financial products and services underlined by novel technologies.
The topics covered in this book which concern the timely intersection of regulatory competition and fintech include the:

- emergence and impact of DLT, its core features, types, use cases and applications in the financial services industry;

- origins of regulatory competition, from Charles Tiebout to the regulatory races to the top and bottom;

- formulation of a definitional matrix which provides a cohesive framework for understanding regulatory competition;

- regulatory frameworks for DLT-based financial products and services in Hong Kong, London, and New York; and

- potential impact of regulatory competition on the future regulation of financial products and services underlined by novel technologies.

This book represents one of the very few studies comprehensively tackling the topic of regulatory competition through the guise of fintech. It will deepen the understanding of lawmakers, policymakers, and regulators concerning the influence and significance of regulatory competition. The discussion surrounding the regulation of DLT-based financial products and services will also be of interest to practitioners, students, and general readers alike.