This chapter argues that AI can be a positive force in consumer protection enforcement, although in its current form, it has a limited range. If not used with adequate caution and safeguards or understanding of its limitations, it could lead to under-enforcement. Enforcement authorities are encouraged not to reach for AI solutions first but reflect on the best strategy for including AI-enabled technology in their enforcement toolbox.

RegTech is the use of technology, particularly information technology, in monitoring, compliance and regulatory reporting by industry, and in supervision and enforcement by regulators. For industry, regulators and policymakers, the pace of transformation in digital financial products and systems requires ever greater use of RegTech. In this sense, FinTech demands RegTech. While the principal regulatory objectives of financial stability, prudential safety, consumer protection, and promoting competition remain, their attainment increasingly requires the deployment of sophisticated technology by both reporting entities and regulators. The increasing use of RegTech prompts a paradigm shift necessitating the reconceptualisation of financial regulation.

This chapter analyses the meaning, legal implications, and policy consequences of Decentralised Finance (‘DeFi’). Decentralisation has the potential to undermine traditional forms of accountability and erode the effectiveness of traditional financial regulation and enforcement. At the same time, where parts of financial services are decentralised, there will be a reconcentration in a different (but possibly less regulated, less visible, and less transparent) part of the financial services chain. DeFi regulation could and should focus on this reconcentrated portion to ensure effective oversight and risk control. In fact, DeFi requires regulation in order to achieve its core objective of decentralisation. Furthermore, DeFi may further the idea of ‘embedded regulation’– building regulatory approaches into the design of decentralised infrastructure, potentially decentralising both finance and its regulation in the ultimate expression of RegTech.

Hong Kong is Mainland China’s international financial centre and capital market gateway, being home to the largest offshore renminbi hub. Cross-boundary connect schemes have significantly boosted capital flows between Hong Kong and the Mainland. Hong Kong’s role in the internationalization of the renminbi and offshore investment is supported by cross-boundary financial market infrastructure and complicated by the dual supervisory and regulatory systems in each jurisdiction. Hong Kong and the Mainland operate under the sectoral model with some key design differences. This chapter argues these differences produce cross-boundary macro-prudential and systemic supervisory underlap across the renminbi and connect scheme infrastructure. To overcome design flaws inherent to the sectoral model, both jurisdictions have created composite systemic supervisors. Cross-boundary underlap constricts these composite systemic supervisors from mitigating systemic risk outside their home jurisdiction. Moreover, Hong Kong and the Mainland have begun adopting regulatory technology to enhance financial market supervision. However, technology does not change the functionality of financial market infrastructure nor the cross-boundary supervisory functions. Technology risks are introduced that expand rather than change the supervisory roles. Cross-boundary supervisors should not reduce risk management requirements merely because technology automates compliance requirements or supposedly eliminates orthodox financial risks.

This chapter discusses the world of financial technology, or fintech, which can be defined as the intersection of financial services and digital technologies. The fintech ecosystem involves a wide range of players that together have transformed the financial services industry, embraced and stimulated innovation and continuously improved customer experience. This chapter provides an in-depth macro analysis of the global fintech industry, describing the current status of the market as well as highlighting current and future trends for the sector. Further, the chapter discusses the impact of digitalization on fintech firms by delineating the opportunities as well as the challenges that it has brought. The last section of the chapter includes two fintech cases studies belonging to the currently “hottest” sub-segments of the sector, namely, “insurtech” and “realtech,” in each case highlighting the main characteristics of the application or platform, presenting the founding team and describing the main company competitiveness indicators for time-to-market as well as user value.

This chapter argues that a Twin Peaks model designed around financial stability and market conduct regulators supervising all financial sectors would overcome the sectoral model’s limitations. This regulatory change supports the evolution and competitiveness of Hong Kong as an international centre for finance and technology. The proposed reform agenda concludes that technological developments, cost-effective and proportionate regulatory reforms, and a modern regulatory architectural design for setting internationally recognised standards of smart regulation enabled by regulatory technology or RegTech must be the path forward.