Fintech Law and Lawyers’ Professional Competencies – Light Toned Confabulation

Financial globalisation has a significant impact on the development of national financial systems and financial legislation. The consequences of the global financial crisis have been

• Soft law regulation, self-regulation, and corporate compliance control are all being actively developed;
• Flexibility, cross-sectorality of standards, simplification of the mechanism for states to undertake international financial commitments;
• High efficiency of global standard setter monitoring programmes, high responsiveness of national jurisdictions to international developments in soft law regulation;
• The acquisition of countercyclicality by various macroeconomic policies;
• Increasing public scrutiny of financial markets and financial systems in general;
• Enhancing regulatory coordination, enhancing the interaction of policies and regulatory practices;
• Developing and combining risk-oriented regulatory and supervisory tools; and
• The expansion of digital technology into the financial sector (FinTech/SupTech/RegTech).

These processes affect both national systems of positive law, national legal doctrines, and legal training systems.

The conceptualisation of the impact of digital technology on the legal system and the training of lawyers began several years ago, primarily abroad. In India, the development of the concept of digital law and academic discussion in this area has only recently begun.

The field of FinTech Law is not only conceptualised at the level of scientific doctrine but also at the level of national strategies and programmes, which contributes significantly to increasing the authority of this field of knowledge. In developed countries, for example, there are strategic documents not only in the field of the digital economy or blockchain, but also in the field of FinTech itself.

One of the consequences of the global financial crisis and the global soft law regulatory framework on national legal and financial systems has been the fragmentation of monetary and financial market regulation into separate risk-oriented regulatory activities and, as a result, into separate sets of legal rules.

As part of the substantiated concept of the evolution of the subject and system of financial law, to argue that, alongside the traditionally predominant fiscal core of its subject-budgetary and tax law-there are clearly two more, namely, monetary law and financial market law.

This underscores the extent to which international financial law influences national legal systems and the effectiveness and responsiveness of national law to global regulatory trends and their pervasive soft-law regulatory complexes. Based on modern trends, it assumes that the subject of financial law includes monetary relations imperatively regulated by the rules of law due to their public importance.

Public importance is assigned to those monetary relations that bear public risks or cause public interest for the state in terms of macroeconomic importance for the development of any segment of the financial system.

However, today it is more relevant to proceed from the fact that it is not funds of the subjects of financial legal relations or even public relations regarding the functioning of these funds that are subject to financial and legal regulation, but the activities of economic cash flow management agents, labelled with public relevance.

Hence, it is advisable to balance the traditionally fiscalised subject of financial law in domestic science at the expense of current post-and anti-crisis trends in legal regulation of the monetary sphere and financial markets. On this basis, the structure of financial law includes three sub-branches:

1. Monetary law
2. Fiscal law
3. The law of financial markets

The impact of the above factors on the system of legal academic knowledge and the legal systems of states causes cross-sectoral linkages to intensify and brings cross-sectoral policies to the fore. This study identifies three such policies that have a significant impact on financial law.

They are macro-prudential policy, anti-diversion policy, and digital policy (fintech policy). On the digitalisation of financial and legal competences In light of the digitalisation of professional financial and legal competences, it becomes relevant.

The international experience of digitalisation of the legal profession is quite diverse. Educational programmes in the field of digital law as Master in LegalTech from Mikolas Romeris University (Lithuania), Law and Technology from Tilburg University (Netherlands), IT Law from Tartu University of Law (Estonia), The Digital Lawyer from Bond University (Australia), RegTech & Compliance in Finance from the International Finance, Technology and Enterprise Centre. And the educational programmes in FinTech Law as Fintech Law and Policy from Duke University (USA), FinTech: Law and Regulation from University of London, Fintech Law and Policy from University of Calgary (Canada), Banking and FinTech Law from Queen Mary University of London (UK), Legal Regulation of Blockchain Technology from PFUR and O.E. Kutafin Moscow State Law University, Legal Support for the Digital Economy from Plekhanov Russian University of Economics, etc

In India, there are still few educational programmes for training lawyers in the digital economy. For example, Fintech Law from Asian Cyberlaw School (India). Universities offer Master’s programmes in Cyber Law like Gitam School of Law.

However, no educational programmes in the field of FinTech law have been fully structured in India. That is due to the above-mentioned inertia of financial law science development in India, its low sensitivity to current trends, conceptual and methodological backwardness from foreign analogues, and the traditional detachment of financial law from financial science.

Therefore, digitalisation lacks basic synthetic financial and legal competence as an object, a formed complex of financial and legal literacy. In other words, the combination of legal and financial skills should be the foundation for digitising a lawyer’s skills in the area of financial law. This talk shows that there are two main things that need to happen before legal and financial literacy can be combined in education:

1. Labour market requirements, increasingly oriented towards complex specialisations in financial consulting, financial compliance, and integration regulation;
2. The convergence of economic and legal sciences in times of crisis.

The main problems teachers face in teaching integrated (economic and legal) disciplines and courses are:

• The inconsistency of the terms in their economic and legal meaning;
• Inconsistency in the description of the structure of economic systems;
• Fragmentation, specificity, and narrowness in their legal understanding; and
• Low degree of legalisation of economic concepts and categories.

This study can identify some blind spots for both lawyers and economists/financiers in the study of finance. They are:

Lawyers’ Blind Spots – risk theory; issuance and circulation of money; global financial standards system, architecture of global financial regulators; Regulatory policy as a modern paradigm of regulation, including financial market regulation; macroprudential regulation as anti-crisis stitching of industry standards in the financial market; interaction and competition between policies (monetary, micro- and macroprudential, fiscal, etc.), differentiation of instruments; problems of economic (including financial) security.

Financiers’ Blind Spots – the specifics of soft law and its relation to hard law; the complexity of the issue of combating illicit financial transactions; the relationship and interaction between the legal orders (global, regional, national); the competence of global regulators; issues of legal technique in financial law. These challenges can be overcome by incorporating the following methodological approaches into the educational process:

1. The emphasis on pedagogical work at the junction (conflict) between economic and legal terminology;
2. Comparing legal and economic approaches to the structure of economic systems (financial, credit, banking, payment, currency, etc.);
3. Increased attention to institutions (the organisational and legal forms of market actors;
4. The specific status of regulators, the scope of their competence and powers); and
5. An economic and legal analysis of international financial standards and their impact on the national financial and monetary system.

Since digital law is already seen as a complex (cross-branch) branch of law within the whole legal system, there are good reasons for this study to recognise FinTech Law as a branch of law within the field of financial law. Based on the observation of teachers teaching FinTech Law at the national and international levels, as well as an analysis of educational programmes of the world’s leading universities, this discussion identifies the following elements of FinTech Law:

• Legal regulation of the circulation of crypto-assets and activities related to crypto-assets (mining, trading, exchange, storage);
• The legal basis for digital payment technologies (PayTech);
• The legal framework for open banking and financial marketplaces;
• The legal framework for fintech lending and alternative finance;
• The legal basis for the application of digital technologies in trade finance;
• Smart contracts in the financial sector (banks, insurance);
• The digitalisation of law enforcement (LegalTech) and digital legality in the financial sector;
• RegTech in corporate compliance (tax, currency, anti-fraud) and SupTech in the activities of financial regulators as parts of the regulatory framework;
• Legal considerations of how Artificial Intelligence/Machine Learning and BigData are used by entities in the financial market;
• Legal provision for cyber security in the financial sector; and
• Legal regulation of digital technology in insurance (InsurTech).

The precondition for the scientific and educational conceptualisation of FinTech Law is globalisation, which has manifested itself in the area of finance both negatively—through the transmission of systemic risk in the context of the global financial crisis—and positively—through the creation of a new risk-oriented system of international and national financial and legal regulation that is sensitive to the digital challenges of today.

The financial law structure should include three sub-branches of monetary law, fiscal law, and financial market law. Cross-sectoral policies (macro-prudential, anti-money laundering, digital or fintech policies) play a significant role in the development of international and national financial regulation. The evolution of the subject and system of financial law in light of the aforementioned processes also includes the necessary formation of the legal institution of FinTech Law.

The discussion proposes that the FinTech Law framework reflects the main areas of application of digital technologies in the financial sector. The digitalisation of lawyers’ professional competences should be based on a synthesis of financial and legal literacy.

Authors

1. Dr. Y .V. Kiran Kumar, Assistant Professor, GITAM School of Law, GITAM Deemed to be University, Visakhapatnam.
2. Dr. Deepthi Rodda, Research Associate, Damodaram Sanjivayya National Law University, Visakhapatnam.