Korea and Australia share insights on regulating fintech
Australian and South Korean researchers, regulators and industry representatives have come together to discuss challenges and opportunities in fintech regulation.
Fostering innovation in financial technology requires a delicate balancing act between enough regulation to prevent scams and protect consumers but not so much that growth and progress are stifled.
Navigating this territory is something governments are grappling with globally, and for the first time fintech regulators, researchers and industry representatives from Australia and South Korea have come together to discuss challenges and opportunities in this space.
South Korea sees fintech as a key industry that will lead the country’s future, with the Seoul Metropolitan Government announcing plans to invest more than $1 billion in blockchain and fintech startups by 2022, through the Seoul Innovation Growth Fund.
“Regulation is something that could make or break the fintech industry, both in Australia and South Korea. If you disallow certain things then you stifle growth and innovation, but on the other hand, good regulation can ensure things don’t break,” says Dr Adrian Lee from the University of Technology Sydney (UTS).
For example, Initial coin offerings (ICOs) offer opportunities for developers of blockchain technology to raise funds from the public through coins or tokens, but they are very risky, says Dr Lee. Investors have lost millions through fraudulent ICO offerings.
“You want to make sure these are regulated, with rules around calling yourself an ICO, and how they are issued, whether in Australia or Korea. In China they have banned ICO’s but Australia doesn’t want to totally kill off the innovation,” he says.
The aim of the Australia-Korea Fintech Regulation Symposium was to facilitate dialogue and foster bilateral relationships, with the event supported by The Korea-Australia Foundation of the Department of Foreign Affairs and Trade and hosted by UTS Business School.
Australia and South Korea have a strong trading relationship, including a free-trade agreement. Enabling business to harness innovation and technology in financial services are policy priorities for both countries, and many fintechs have ambitions to operate globally.
“Fintech is a broad area that can help businesses and economies grow. But where there is a lack of regulation, industry needs clarity to avoid wasting time and money developing products that might be banned,” says Dr Lee.
Fintech is a broad area that can help businesses and economies grow. But where there is a lack of regulation, industry needs clarity to avoid wasting time and money developing products that might be banned.
Dr Adrian Lee
Senior Lecturer, Finance Discipline Group
Australia currently chairs the International Standards Organisation (ISO), which is developing standards for blockchain. While blockchain is most closely associated with Bitcoin and other cryptocurrencies it is a technology that will likely underpin future international commerce and trade.
UTS Senior Law Lecturer Dr Philippa Ryan, who leads the ISO Blockchain Technical Committee Smart Contracts Group, says the aim of standards is to achieve “market liberalism, interoperability and improve trust and reputation”.
“If you design an international aircraft and it cannot land at any international airport it fails the interoperability test. This is how we need to think about global products. Like the internet, GPS and telephone systems, this is not something you want to develop in isolation,” she says.
Cliff Richards, ASX Executive General Manager, Equity Post Trade Services, says the ASX is examining the use of blockchain and distributed ledger technology in regulated capital markets, including the maintenance of share registries, to reduce processing time and increase accuracy.
Assistant Professor KiHoon Hong from Hongik University in Seoul says the “red hot” nature of the crypto market during 2017/18 in South Korea meant the stability of the financial sector and investor protection was the key concern when it came to blockchain regulation.
“Regulation is definitely needed, however Korea can also learn from Australia regarding the use of blockchain technology in other applications, and separate the technology from the crypto market,” Assistant Professor Hong says.
Australia offers a ‘regulatory sandbox’ method, run by ASIC, that provides fintech startups with three broad options for testing a new product or service without a licence, along with support and advice around what they can and can’t do in a particular area.
Fintech startup products and services supported through the ASIC Innovation Hub include roboadvice, crowd funding, peer-to-peer lending and regtech through to ICOs and the application of Artificial Intelligence and data solutions in financial services.
“Now the first steps have been taken, we hope to continue the dialogue between Australia and Korea and build on the relationship. The symposium also highlighted the important role of universities in supporting innovation,” Assistant Professor Hong said.
Read the speaker presentations on the Symposium web page.