Jurisdictional Compliance and Regulation in FinTech
Know the Rules where you Wish to Operate
Zurich, Monday, May 20th 2019
Jurisdictional Rules and Regulations! To many people in the world of finance and FinTech, those two words usually bring a huge negative sigh, followed by the words “here we go again”.
For many developers/entrepreneurs in the field of FinTech, the regulations of the jurisdictions in which they hope to expand their product usually is a secondary thought.
Their goal is to create a product that can be launched throughout the world and disrupt the financial services sector for the benefit of the masses, while at the same time making substantial monetary gains.
This is a wonderful and achievable goal, but unless they do an analysis of the regulatory rules of the jurisdictions which they hope to operate, the success they hope to reach will be impeded.
Swiss FinTech entrepreneurs and developers should know that what is permitted in Switzerland, may not be allowed in other European countries. Additionally, what may be allowed in Europe, may not be allowed in other parts of the world. In short, one size does not fit all.
Not only will a developer/entrepreneur have to deal with different national laws, but also the different types of laws. The one size fits all approach is not the approach to take, as there can easily be a different outcome for the same product dependent upon the jurisdiction’s use of Civil, Common or Sharia law.
Most start-ups begin their venture with limited funds and personnel. Because of this, they usually don’t have the necessary funds to maintain a legal counsel as part of their team.
Many start-ups feel lawyers are not necessary and they can figure out the “legal stuff” on their own, while others think the laws in other jurisdictions will easily adjust to their product.
Some view a lawyer as an added cost and as person that is only going to tell them what they can’t do and slow them down.
Taking these views can be detrimental in the long run. Unless the developer/entrepreneur has the legal expertise, not doing his research and understanding the jurisdictional regulations will put him at a serious disadvantage against the huge financial conglomerates which do have the financial and legal resources.
FinTech is new and the rules and regulations surrounding it are ever changing, thus I would encourage you to not take a negative approach towards legal counsel.
Start-ups should be reminded that their competition, the well-funded and established financial institutions, are diligently working with regulators to ensure their products are compliant throughout multiple jurisdictions.
The world of finance is and has always been heavily regulated. The fact finance is moving to the digital world, will not reduce the regulations one must comply, but will probably increase the compliance and regulatory standards for FinTech products.
Swiss developers/entrepreneurs should not think that just because it is legal and compliant in Switzerland, it will be compliant everywhere.
Switzerland is a country of 8 million inhabitants, so if you wish to deploy your product in any of the 195 other countries to reach the nearly 8 billion consumers, you will have to know the rules and regulations of the jurisdiction you hope to operate.
Swiss FinTech developers/entrepreneurs are fortunate to have progressive regulators which are working closely with the FinTech community to create the appropriate legal framework to make FinTech a success in Switzerland.
Unfortunately, not all jurisdictions around the world have progressed to this level and are still determining how to regulate FinTech.
If you are in the process of developing your product and haven’t taken the time to think about the jurisdictions and their regulations you hope to deploy your product, now is the time.
One step is to easily review the ICLG.com website. This site is an excellent source which lists 59 countries and their FinTech Laws and Regulations and lets you know what regulations and licenses would be needed to operate within that jurisdiction.
As a FinTech company you have the opportunity to achieve your goal of disrupting the financial services industry, but you cannot if you don’t know the rules.
You can help your project by taking the following steps:
- Recognise that there are multiple jurisdictions and laws which will apply to your product. One size will not fit all.
- Take the time to research and know what licenses and regulations will apply to your product.
- Engage competent legal counsel to assist in reaching your goal
Micah D. Wells J.D., LLM
Micah D. Wells is an American licensed Attorney presently located in Dubai, UAE. A legal practitioner for over 25 years, he has worked in both the private and public sector in both the U.S., Europe, Africa and the Middle East. He possess a Doctorate of Jurisprudence from the University of Missouri-Kansas City, two LLMs, one in Commodity Trading Law the other, International Contracts and Arbitration in addition to a Certificate in Advanced Studies in Compliance from the University of Fribourg. He has authored several articles in international trade magazines on DLT in the Commodity Sector, FinTech in Switzerland and International Sanctions (U.S-Iran) in addition to conducting lectures to American Bar Associations and Universities on the topics of ethics and the international practice of law.