Digital Finance Regulation Saeed Hassan Hong Kong, May 5, 2015
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Issuers Investors
Investor Side Platforms or Dashboards
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Issuer Side Platforms or Dashboards
Data, Research & Services
Back Office Services
Source: Grow Advisors market analysis
Background
Lack of lending by traditional institutions post 2008 - SMEs seen as the backbone of many economies, and key generator of jobs
Declining trust - Traditional institutions seen as carrying burden of responsibility
Technology - Led to a greater reach among a much wider audience, often internationally.
Rise of sophisticated social networks - “true identities”, ID checks and secure online transactions
Background
Startup Culture - Often held back through lack of funding and inefficient ecosystems
Need to increase efficiencies - Many industries looked to remove intermediaries / middlemen
Technology - Led to a greater reach among a much wider audience, often internationally.
Why change?
Boost confidence and greater transparency - Decentralisation | democratisation: allow more people to be part
Funding - Particularly among start up companies and create jobs
Un-tap potential of savings - Better informed investors, accessibility to deal flow and diversification
Leaner, more efficient market places - Eliminate traditional closed door networks
So what happened?
Pre-existing - Offline networks among select investors (e.g. HNW, Angels, VCs)
Watershed moment: US Jobs Act, April 2012 - Number of countries with specific regulation or plans increased rapidly…
An iterative process - Several of the early starters have already made revisions to original legislation
USCanada, Italy, US, Malaysia, Australia
New Zealand, France
Germany, France, EU, UK, Australia, India, Spain, New
Zealand, Japan, Spain, EU, China
Italy, Thailand, US, Canada, Singapore, Germany, Taiwan
Paradox - Those with the strictest regulations are making them less so. (Italy vs. New Zealand)
Asia - New Zealand, Australia & Malaysia among the 1st. Singapore, Thailand and Taiwan to follow.
US - Complexity of State vs. Federal law an added hurdle.
Leaner, more efficient market places - Eliminate traditional closed door networks
So what happened?
Issuers - Commonly used by startups but also seen to invigorate investment (e.g. real estate)
Crisis | Incidents - On the contrary, healthy growth where regulation has worked, stalled where it hasn’t
So what happened?
Retail investors are welcomed - With investment limits per offering or per year.
Maximum raise - Many capped the maximum an issuer can raise
Registration and licensing - Reporting requirements, including user activity. Minimum capital requirements & insurance.
Common traits
Crowdfunding capital of the World - London has the most campaigns per day, though the US leads the UK overall.
Factors - Open minded, balanced regulation allowed CFPs to flourish. Embraced innovation.
Tracking - Data obtained by the FCA shows the industry has continued to grow strongly post regulation.
Other Factors - US/UK equity investment culture (vs. Germany) an enabling factor. Singapore / Hong Kong?
Success Stories The UK
Competitors and other market players? - VCs have taken advantage of crowdfunding and traditional banks are looking at P2P
Future impact - Well thought out plans will help financial centres such as Hong Kong cement their position
Resource Utilisation - Better circulation of public and private funds will increase efficiency of the market and
boost the market
Finally
Saeed Hassan [email protected]
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