The fintech sector in Asia-Pacific is booming and, following in the footsteps of the UK, regulators across the region have set up sandboxes to encourage fintech innovation and competition. But there are also challenges, writes Simon Hawkins
In recent years, the term ‘fintech’ has become ubiquitous in the financial services world, but it is worth remembering that the use of technology in finance certainly is not a new concept for regulators – they have been following fintech developments for decades and adjusting rules, regulations and procedures to address the intersection of technology and finance (think ATMs, online banking and dematerialized securities markets).
However, the rapid pace of technological development in recent years and the creation of fundamentally new concepts – such as distributed ledger technology, which can be used to completely disintermediate traditional financial services players – is making it more challenging than ever for regulators to adapt to technology-driven changes in the financial services industry.
One regulatory response that has emerged is the regulatory sandbox – a “safe space” in which businesses can test innovative products, services, business models and delivery mechanisms without immediately incurring all the normal regulatory consequences of engaging in the activity in question (e.g., the requirement to be licensed and supervised by a financial services regulator).
Simon Hawkins is a Hong-Kong based counsel at Latham & Watkins specializing in financial regulation. Rob Moulton, Andrew Moyle, Charlotte Collins, Brett Carr, Stuart Davis, Fiona Maclean and Alexander Hendry, also contributed to the article.
