Norton Rose Fulbright’s Victoria Birch is one of the pioneers
As bailed-out banks battled to come to terms with a less forgiving world in the wake of the 2008 financial crisis, a host of tech start-ups seized the moment to develop new ways of providing financial services.
At first, many of the new peer-to-peer lending networks, mobile payment systems and indeed whole new currencies that sprung up were deemed to be quirky, yet niche, while others, such as Bitcoin, were viewed by some as rather dangerous.
Several years on and a world that has become more at ease with technology is inviting these innovations to join the mainstream. Techies are trading their Shoreditch coffee shops for smart City of London offices as banks, regulators and governments embrace an emerging industry that has the potential to revolutionise how we use financial services.
One of those at the coal face of this shift is Norton Rose Fulbright Of Counsel Victoria Birch, who, as part of the global team focussing on FinTech at Norton Rose Fulbright, has seen an explosion of interest in the sector in the last few years. She reflects:
There has always been a strong crossover between our technology and innovation, and financial institutions sector focus groups and so, with increasing client interest on the use of technology in the financial services industry, we have been able to build a global team of experts to specifically focus on FinTech innovations, such as distributed ledgers and crypto currencies.
As many clients in the financial services sector are researching and assessing potential use cases and even undertaking initial deployments of the technology, there is growing interest in the legal and regulatory framework within which the technology will operate and it is here that we can add real value to clients. Demand for specific expertise in this area has been very strong over the last 12 months and there is little sign of this demand abating in the near future.
Blockchain is one of the key areas of focus in the FinTech world. To the uninitiated, it is, in the words of Recode, “essentially just a record, or ledger, of digital events — one that’s ‘distributed’ or shared between many different parties.” What is more, a blockchain “can only be updated by consensus of a majority of the participants in the system [and] once entered, information can never be erased”.
Blockchain is the technology that forms the basis for crypto currencies such as Bitcoin, but is now being applied to a wide range of activities across the financial services sector — in areas like clearing and settlement, trade finance, asset ledgers and personal identity verification. Many potential use cases also include the use of “smart contracts” which provide the opportunity to automate and streamline transaction processes.
Such changes present challenges as well as opportunities, as lawyers and regulators assess how or if these new processes fit within the existing legal and regulatory framework and what, if any, regulatory and legal changes will need to be made. In a way, as Birch says, “we are running a digital technology on an analogue law.”
In fact, there is a desire within the FinTech community itself for further clarity on the regulatory framework within which it will operate and on the status of the FinTech businesses themselves. There is also a desire to address certain potential risks for users — for example, in respect of consumer protection and the prevention of crime. With this in mind many FinTech companies are looking at the adoption of voluntary guidelines and self-regulation to promote good practice.
Rather than stifling innovation, greater regulatory and legal clarity is seen by many as enhancing the technology’s credibility and providing greater comfort to the customers and financial institutions that they are targeting. As Birch says, “there is something of a balancing act between having thoughtful regulation to address the concerns of regulators and users without limiting the potential of the technology.”
Another potential challenge is to navigate the patchwork of financial services legislation in different jurisdictions, particularly when dealing with global technologies — and this is where the Norton Rose Fulbright team’s global capability is paying dividends. As Birch points out, “at any given time, we are able to call on experts from around the globe who have specific expertise in this area and this enables us to provide focussed multi-jurisdictional advice on the legal and regulatory impact of deploying this technology across the world.”
In this frontier environment, understanding the industry of the client you are advising is a huge positive. Birch comments:
The golden ticket here is a lawyer who understands technology and corporate finance.
Norton Rose Fulbright is currently holding coding classes for trainees and associates as part of its wider sector focus programme. Birch explains:
We are not saying that they have to become brilliant coders, rather that it is important for them to have a broader understanding of the context in which their clients work. As with any industry it is important to be able to speak the same language as your clients and with those entering the profession as trainees generally far more at ease with technology than some more senior lawyers, there is a great opportunity for them to make their mark in this area.
And with the tech revolution also hitting other industry areas like retail, transport and healthcare, it is this capacity to think more deeply about clients’ challenges that will define the successful lawyers of the future. Birch sums up the positive mood prevailing right now among her colleagues:
It’s a fantastic time to be entering the profession.
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