ARYZE spoke with lawyer Dalibor Cerny about his work in the uncharted territory of fintech regulatory law and how traditional players like banks can interplay with the fintech sector
Dalibor Cerny currently works as a fintech and new tech lawyer in Prague, Czech Republic. Dalibor initially worked as a finance lawyer with traditional finance institutions and later decided to delve also into the world of startups, finding the work there to be more innovative and future-oriented. Crowdfunding was the initial impetus that led him to seek out less traditional work. As a fintech lawyer, Dalibor has the opportunity to work in an uncharted, unregulated area. As Dalibor points out,
The area specific laws don’t exist and it’s a heavily unregulated space most of the time. From my point of view this is very interesting because I actually have a chance to make an impact on how these laws are going to look like in the future. Let’s take blockchain and cryptocurrencies for example – this is a heavily unregulated space and these companies and startups really have a problem in the beginning to know which regulations they should actually comply with and sometimes even me or other lawyers in this area, we just don’t know and we need to engage in detailed discussions with regulators.
Although still very much uncharted territory, the fintech sector is more charted now than ever. Working in the Czech Republic, Dalibor must comply with European Union regulations and local ones as well. He supports the European Commission in the sense that it has the advantage to harmonize rules for things like blockchain and cryptocurrencies. Dalibor notes that the European Commission and the policy makers are interested in understanding what the market needs and which regulations should be in place:
There are many regulations for the traditional financial sector in place already and I think sometimes the new fintechs or other innovative companies are not certain which regulations from the traditional world they should actually comply with and simply which way to go. For some specific areas like cryptocurrencies and blockchain there’s no specific EU regulation at all at the moment, but it is now being developed. The European Commission and the policy makers are currently asking the market through public consultations for opinions, as they see the need for more legal certainty. Harmonization of rules and regulations will make life of everyone involved much easier and it will help the sector to move forward much quicker.
Dalibor explains that initially the fintech sector positioned itself as a disrupter to the traditional finance players that intended to substantially disturb or even destroy the traditional banking system by creating services that would be so great that people wouldn’t need banks, but he doesn’t think that will be the case in the near future. Instead he supports cooperation between traditional and innovative players.
Cooperation between fintech and traditional players
In many fintech oriented jurisdictions there are platforms like fintech innovation hubs (one is now being developed also in Prague) where traditional players can connect with fintech startups and regulators to come up with solutions that might work best for everyone. This cooperation may not be ideal for some more “aggressive” promoters of fintech; nonetheless, Dalibor supports this more peaceful approach.
He doesn’t believe that democratization of money means necessarily full decentralization, at least not yet at this time when people are not ready for it. He feels that at the moment people still want to have the safety of some kind of centralized solution or entity (which takes care of problems when they come up) but also want to have the flexibility to make their own decisions and choices. Good example of this is traditional crowdfunding, which we can say is still centralized through crowdfunding platforms (which provide certain safety and information flow to the investors) but also provides for money democratization because people can decide by themselves, where they want to invest their money.
I think the better way is cooperation actually. Between the traditional players such as banks or insurance companies or similar entities and the fintech startups. The traditional finance players, they have the capital, not just money, but also people, experience and time. The startups may have good ideas but sometimes they don’t have the market experience, sometimes they don’t have the money or other kind of support they need. So I think the best solution for everyone is mutual cooperation.
From the regulatory point of view, sometimes we see, when there is not enough cooperation or when there is maybe even fear from the unknown or other kind of inflexibility on the side of the regulator, that this can even cause startup companies to just shut down because there is no other way. New companies and innovators do not want to risk severe legal penalties because of the lack of regulatory support and consequent legal uncertainty.
The uncharted territory of the fintech sector is becoming more regulated, which is not inherently a bad thing and it may be crucial to include traditional players in order to fully implement innovative ideas safely and successfully.
Dalibor is a founder of the new tech advisory network www.visions.network.
For more insights into cooperation between traditional players and fintech, please visit ARYZE’s blog.