By Ajay Shamdasani (Host, Regulatory Ramblings Podcast)
The opinions expressed in this blog post are solely those of the author and do not necessarily represent the views of HKU FinTech or its affiliated organizations.
With HKU FinTech Day 2023 behind us, I’m still trying to process much of what I heard and learned. Frankly, I’m in awe of the potential for a financially inclusive world through technological innovation spawned by blockchain applications. As my boss and mentor, The University of Hong Kong’s Professor Douglas Arner, has reminded us from time to time: we’ve come a long way from a paper first posted online by someone named Satoshi Nakamoto on a fateful day in January 2009.
Yet, blockchain networks and digital tokens stand ready to provide banking services to many of the world's unbanked denizens, as well as to create societies that foster grassroots solutions to the unique project funding needs of specific communities. Such advances can help usher in the much-needed financial inclusion that global bodies such as the World Bank have pontificated on since the start of the last decade.
For example, in the context of decentralised autonomous organisations, or DAOs, tokens democratise finance by giving one a say in the decision-making processes of such entities because tokens can possess voting rights – thereby engendering communities run on the basis of consensus.
Similarly, Web3 is a boon for entrepreneurs and activists because it has few barriers to entry. All that’s needed is an Internet connection, a computer, and possibly a digital wallet. The physical world is immaterial to operating in the Metaverse – with some enterprises choosing to do precisely that with a minimal real-world, brick-and-mortar footprint.
However, as we avail ourselves of the benefits of this brave new world, we must remain cognizant that regulatory guardrails are still important – the anarcho-libertarian ideal of a community of technology users governing themselves is not practical. Indeed, a recent book entitled FinTech: Finance Technology and Regulation and authored by Professor Arner, as well as Professor Ross Buckley of the University of New South Wales and Professor Dirk Zetzsche of the University of Luxembourg, prudently concludes that changes in law and regulation must move concurrently with developments in finance and technology.
HKU FinTech Day 2023 was a memorable day that provided much food for thought with panels ranging from discussions on tokenization to securitization to how innovations in FinTech and RegTech can be used to solve the complex environmental challenges flowing from climate change, as well as the launch of HKU’s Professional Certificate in FinTech Technologies. A common thread linking all the panels together was that while technological solutions abound, the right kind of regulatory and tax policies are needed to spur such advances on. Implicit in that is private and public sector partnership as nation-states will not be able to provide all the finance capital that will be needed in the coming years and decades.
Technology on its own isn't enough - we need the right kind of regulatory policy. That means action from regulators and policymakers, but it also means public-private partnership because the expertise and financial resources of the latter will be critical; trillions in investment will be required in the years and decades to come. Market mechanisms are needed to incentivise corporations, large and small, to develop of the requisite technologies. Only with a favourable profit and tax environment will the private sector be incentivised to join hands with government and 'enter the fray,' so to speak. The resort to a wartime or survival analogy is apt because it's a case of do or die. As Edoardo Francisco Sabatino, CEO of Climate Kick and a speaker on the green fintech and startups panel moderated by HKU Law's Sijuade Animashaun, said: we're the first generation to see first hand the real impact of climate change and the last to be able to do anything about it.