Fintech: Teaching the Law of it in 2021

Teaching the Law of Fintech:

We developed the case studies over two years in this book by teaching some Fintech modules at Harvard Law School. With these modules, we wanted to acquaint students with the ongoing digital transformation of financial services. We have believed from the beginning that is an umbrella term that encompasses many different phenomena and a wide range of business models. Fintech’s rights do not resemble the legal entities commonly associated with legal courses, such as property, contracts, or damages.

Fintech itself is the by-product of continuous innovations in digital technologies, including communications networks, computing power, and data analytics. Fintech’s influence is not limited to a single set of financial products or a specific area of legal doctrine or regulatory policy. Instead, Fintech reaches every corner of the financial world, involving every industry. Fintech’s law is equally broad.

To introduce students to this new domain, we have chosen to develop a series of case studies based on the Harvard Business School case study method but adapted for legal education. In each case study, students are placed in an institutional setting that a young attorney can find in a law firm, government agency, meeting office, or another area where practicing attorneys can expect to address legal and policy issues regarding Fintech innovations.

The Fintech ecosystem

 Because of the ubiquitous nature of Fintech innovation, some have suggested that the term Fintech, while fascinating, is so broad and comprehensive that it loses its meaning. Fintech, in the short term, certainly refers to the many different innovations that can disrupt or challenge existing financial services companies and existing regulatory practices.

It refers to those who work with the financial services industry and the investments of the financial sector in new technologies. So far, fintech contains at least a dozen different areas of innovation.

These include algorithmic and credit providers, high-frequency robotic advisors and trading strategies, a full range of payments, both business-to-business and business-to-consumer, as well as application insurance, digital banking, cryptocurrencies, digital hub banks, credit and analytics outlets, payment and benefit systems, real estate investments, compliance software and other forms of Regtech, blockchain, core infrastructure, banking, and many other products and services.

There is no Fintech, but a Fintech ecosystem. In the image below, we provide a possible taxonomy to organize how many of today’s most well-known Fintech brands fit into this rapidly evolving ecosystem.

Our approach to fintech legislation The wide range of fintech ecosystems means that fintech legislation and the public policy issues relevant to its regulation are as diverse as fintech innovations.

 On a theoretical level, three fundamental questions can be asked about the legislation and policies relevant to Fintech’s innovations.

1. What aspects of our current and highly fragmented financial regulatory system must a specific innovation comply with? In other words, where does innovation fit into the existing regulatory framework?

 2. Once the appropriate scope of the regulation has been determined, a separate question arises: does the current legal framework provide effective and equitable management of related, and is the current legal framework inadequate or inadequate?

TEACHING THE FINANCIAL MARKET ACT 3

Finally, and often critically, what is the impact of innovation on current companies and other stakeholders, and does it raise concerns about government policy or the political or bureaucratic resistance that an entrepreneur must be willing to overcome? The case studies in this e-book are designed to examine these questions in 14 different contexts, and the answers to the questions vary from context to context and are often controversial. In some cases the applicable legal limits are clear, but in other cases, the application of jurisdictional restrictions is very uncertain.

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