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Fintech and the Innovation Trilemma

dc.contributor.authorYadav, Yesha
dc.contributor.authorBrummer, Chris
dc.identifier.citation107 Georgetown Law Journal 235 (2019)en_US
dc.descriptionarticle published in a law journalen_US
dc.description.abstractWhether in response to roboadvising, artificial intelligence, or crypto-currencies like Bitcoin, regulators around the world have made it a top policy priority to supervise the exponential growth of financial technology (or "fintech") in the post-Crisis era. However, applying traditional regulatory strategies to new technological ecosystems has proven conceptually difficult. Part of the challenge lies in the tradeoffs involved in regulating innovations that could conceivably both help and hurt consumers and market participants alike. Problems also arise from the common assumption that today's fintech is a mere continuation of the story of innovation that has shaped finance for centuries. This Article provides a novel theoretical framework for understanding and regulating fintech by showing how the supervision of financial innovation is invariably bound by what can be described as a policy Trilemma. Specifically, we argue that when seeking to provide clear rules, maintain market integrity, and encourage financial innovation, regulators have long been able to achieve, at best, two out of the three goals. Moreover, today's innovations exacerbate the tradeoffs historically embodied in the Trilemma by either reconfiguring or disintermediating traditional financing operations and the discrete services supporting them, thereby introducing unprecedented uncertainty as to their risks and benefits. This Article thus proceeds to catalogue the strategies taken by regulatory authorities to navigate the Trilemma, and posits them as operating across a spectrum of interrelated responses. It then proposes supplemental administrative tools to support not only market, but also regulatory data gathering and experimentation.en_US
dc.format.extent1 PDF (75 pages)en_US
dc.publisherGeorgetown Law Journalen_US
dc.subjectfinancial regulationen_US
dc.subjectbig dataen_US
dc.subjectinvestor protectionen_US
dc.subjectRule 10b-5en_US
dc.subject.lcshBanking and Finance Lawen_US
dc.subject.lcshScience and Technology Lawen_US
dc.subject.lcshsecurities lawen_US
dc.titleFintech and the Innovation Trilemmaen_US

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