BigTech & Platform Finance

Updated: Nov 17, 2021

BigTech & Platform Finance: Governing FinTech 4.0 for Sustainable Development

by Douglas W. Arner (The University of Hong Kong, Faculty of Law), Ross Buckley (University of New South Wales, Faculty of Law), Kuzi Charamba (University of Hong Kong), Artem Sergeev (University of Hong Kong, Faculty of Law) and Dirk A. Zetzsche (Universite du Luxembourg) :: SSRN | Last revised on: 8 November 2021


Over the past 150 years, finance has evolved into one of the world’s most globalized, digitized and regulated industries. Digitalization has transformed finance but also enabled new entrants over the past decade in the form of technology companies, especially FinTechs and BigTechs. As a highly digitized industry, incumbents and new entrants are increasingly pursuing similar approaches and models, focusing on the economies of scope and scale typical of finance and the network effects typical of data, with the predictable result of the emergence of increasingly large digital finance platforms. We argue that the combination of digitization, new entrants (especially BigTechs) and platformization of finance – which we describe as FinTech 4.0 and mark as beginning in 2019-2020 – brings massive benefits and an increasing range of risks to broader sustainable development.



The platformization of finance poses challenges for societies and regulators around the world, apparent most clearly to date in the US and China. Existing regulatory frameworks for finance, competition, data, and technology are not designed to comprehensively address the challenges to these trends to broader sustainable development. We need to build new approaches domestically and internationally to maximize the benefits of network effects and economies of scope and scale in digital finance while monitoring and controlling the attendant risks of platformization of finance across the existing regulatory silos.


We argue for a principles-based approach that brings together regulators responsible for different sectors and functions, regulating both on a functional activities based approach but also – as scale and interconnectedness increase – addressing specific entities as they emerge: a graduated proportional hybrid approach, appropriate both domestically in the US, China and elsewhere, as well as for cross-border groups, building on experiences of supervisory colleges and lead supervision developed for Globally Systemically Important Financial Institutions (G-SIFIs) and Financial Market Infrastructures (FMIs). This will need to be combined with an appropriate strategic approach to data in finance, to enable the maximization of data benefits while constraining related risks.



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In this episode of Looking Back Looking Forward, Professor Douglas Arner discusses how regulatory and FinTech issues have diverged, particularly in the case of crypto normalisation: cryptocurrencies and digital assets integrated into the regulated financial system. Rather, regulators in the US, UK and, most recently in China, have issued warnings about crypto and digital asset exchanges operating in their respective systems. Bitcoin’s headway, which prompted rising competitors such as Dogecoin and other crypto assets to emerge, had created concern for regulators to protect consumers and prevent potential market collapse. Professor Arner also describes China’s push to drive cryptocurrencies out of the Chinese financial system, in preparation for the country’s Central Bank Digital Currency scheduled for next year, causing financial systems around the world to re-evaluate their regulatory policies.



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