Property law reform: Data, e-money and the fate of fintech

Nội dung text: Property law reform: Data, e-money and the fate of fintech

1. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM 66 . 1Huynh Thien Tu* Abstract Technology developments motivated financial service actors to rethink how they operate business. New forms of assets surface to challenge our traditional thinking on the term of property, e.g., big collection of customer data used in algorithmic decision, crypto- assets including several decentralized currencies via a network secured transactions. Although many have voiced their support towards a legal recognition of new assets formed by digital data, consensus have not been reached on even a basic definition. The government to date has experienced uncertainties in a regulatory framework possibly applicable to E-asset and to FinTech legal framework in whole. This paper introduces and discusses major regulatory trends regarding ownership framework of data among worldwide states, focusing on the pros and cons of regulatory choices. Analyses are made into current property law regime to explore whether specific forms of FinTech assets such as cryptocurrency or customer data could be regarded as property thus establishing its ownership under current Vietnamese property law. Upon this point, the paper suggests principles in property law reform to enhance law system integrity, interest protection and economic development in transitional Vietnam. Keywords: Cryptocurrency, e-money, fin-tech, property law 1. Introduction The fourth digital revolution put forward some of the most critical challenges to our traditional understandings on the foundation of economic and social institutions. In the financial field, revolutionary devices with built-in internet capability, together with autonomous algorithm kicked-start a series of change all over financial business and * University of Economics Ho Chi Minh city | Email: tuth@ueh.edu.vn 994
2. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM policy makers. Eventually, fin-tech drew attention from not only public and private actors, but also outsiders who have never been familiar to financial activities. Information and communication technologies (ICTs) created an environment for users to share and exchange information, to an extent that a range of social spaces is formed (Cohen, 2006). On this alternative space, people do not find themselves communicating to the machine, but to other collective users (Wellman et al., 1996). Screens do not obstruct people from communication, rather, software applications enable a series of new way to conduct social activities followed the basis of real-life activities, including norms and ritual standards which people have to follow. However, new way to communicate triggers new standards and forms of the way we exchange information and values (Smith & Kollock, 1999). 1.1. Data as a fuel to FinTech revolution Data plays an essential role at the very core of such emerging economic order. Valuation of data to the development of the Industrial Internet has been delivered both at the academic level and in practice (Hoeren, 2014; Malgieri & Custers, 2017). When we break the technologies and methodologies of the Industrial Internet into layers2, it is easy to recognize the flow of data from the very bottom layer – the generation, collection of input information, all the way up to the business behavior of providing digital services, user experience and constructing business models. During the course of data processing, values are created and added to the data itself through the works of analysis, modelling and simulation made possible by algorithmic methods (Martti Mäntylä, 2019). On the other hand, the very data contributes to the whole value logistical chain, enabling designers, service providers and other stakeholders to better make use in decision making and information mining. In addition, to enable avant-garde technologies such as big data, artificial intelligence built on the ground of machine learning, input data are mixed, converted and organized into somewhat “bigger” structure to fit into and drive algorithm towards autonomous decisions which contribute to the business activities. The importance of data to the development of ICT, which played the vital role in shaping 2 The author is referring to the Industrial Internet Technology Stack proposed by Martti Mäntylä (2019), in Ballardini R.M., Kuoppamäki P., Pitkänen O., et al., eds. (2019), Regulating Industrial Internet through IPR, data protection and competition law, Kluwer Law International B.V, Alphen aan den Rijn, The Netherlands. 995
3. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM today’s economic and social reform, results in the metaphor in which data are seen as the “oil” of the digital era3. As technology rises, actors in the financial service field started to implicate these advances to deliver operative and management solutions (Zetzsche et al., 2017). The FinTech chronicle commenced with the usage of technology to analyze and assess risk that serves to enhance financial service business, at the same time to comply with regulations and walk hand-in-hand with financial policy makers and regulators (Zetzsche et al., 2017). However, the boom of FinTech startups introduce new active players into financial services (Arner, 2017). There were reported to be 115 startups in FinTech in 2020, contributing to the FinTech ecosystem as a whole (FIntechnews.sg, 2020). Eventually, firms possessing a quantum-large amount of personal data with built-up analyzing technology could probably deliver better personalized marketing thus increasing their appearance in the financial service markets. “TechFins” have been addressed as new competitors who challenge traditional financial institutions (Zetzsche et al., 2017). Additionally, technology advances are also applicable to the compliance process, “RegTech” represents the collaboration between regulators and financial service actors to make financial regulation more effective and affordable (Arner, 2017). 1.2. E-Asset and E-Money: Rethinking money in the digital era Blockchain emerges as a new form of data processing, a storing method for transaction records and value (Gates, 2017). Cryptocurrency, lying centered in technology advancements, made possible by the application of blockchains, plays the role of a digital currency based on complex calculations and the idea of a decentralized currency. In this sense, cryptocurrency is a subset under the term “electronic money” (E-Money), which stands for any currencies or accounts that does not exist under any physical forms (Pieters, 2016). It is sometimes interlinked with the term “crypto-assets”, which refers to digital units that are created and transmitted by users using cryptography (Bashynska et al., 2019). The paper would not discuss further the technological principles and its meanings to the definition of cryptocurrency. Within this paper, E-Money would be understood as cryptocurrency. However, cryptocurrency, highlighted by some outstanding names as 3 See Hoeren D.T. (2014). Big Data and the Ownership in Data: Recent Developments in Europe. European Intellectual Property Review, 36(12), 4. See more: XING Hui-Qiang. “大数据交易背景下个人信息财产 权 的 分 配 与 实 现 机 制 ”. Secress ( 安全内参）, , accessed: 02/21/2021. 996
4. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM Bitcoin, Ethereum, or more recently Pi, is different from other digital currencies in two aspects: first, it is created on cryptographic grounds, which means the currency is encrypted to an extent that only users who possess the key to decrypt can have access to it; second, it is decentralized, which means it is written on distributed ledger for all players and transactions are conducted peer-to-peer without interventions from any centralized institution (Bashynska et al., 2019; Gates, 2017; Renwick & Gleasure, 2021). This feature eliminates intermediate actors in the financial field from taking part in cryptocurrency exchange. Financial institutions and public actors are stepping out of the financial game if they do not act instantaneously to adapt or to actively take part as a determinant to change the whole picture. 1.3. The matter of choice: legislative response to FinTech and new types of assets Amidst changes in means of production and logistical solutions, it is necessary to provide a throughout legal recognition to data as an input material to the industry on which a legal status of industrial data, blockchain technology and E-Asset could be justified. Problems to the traditional legal approach towards ICT are listed as follow: (1) Vietnamese law system is built following the Soviet socialist law paradigm. The whole system is divided into separate law fields and categories, in relation to sociologist study fields. To acquire a notion to valuable data and E-assets – the offspring from the marriage of technology, finance and transactional relationships, regulators must choose between two options: to expand the current legislative coverage to further include e-asset and data; to modify the regulations based on existing framework without changing the whole legal paradigm; or to form a more suitable legal framework to fit in the digital era. (2) There is no official recognition in law towards E-assets. The current regime regards all physical and intangible objects as different forms of property, however, to be qualified a property status, an object must be under certain title that belongs to ownership of entities such as individuals or organizations. Currently, the Civil Code and other Vietnamese legal statutes in both information technology field and financial field do not provide any legal status to industrial data and E-assets. In May 2020, the Head Minister of the Ministry of Finance announced the formation of a Board of Research to conduct researches into legalizing E-asset and E-money (Tạp Chí Tài Chính, 2020). (3) The State Bank of Vietnam (SBV) have officially been advising Vietnamese citizens and organizations against all transactions made with E-money, including capital mobilization and payment. The State Bank of Vietnam made clear that under current legal regime, E-asset is not regarded as a property, therefore, all 997
5. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM transactions made by E-money are illegal and not protected by law. SBV holds that it does not recognized E-money as monetary means as well as its function as a payment intermediary. The research aims to provide a direction between various options for future legislative efforts in order to create a smooth digital transformation in economic and society regarding finance. Detailed objectives of the research are, first, specifying current Vietnamese approach in FinTech legislation in comparison to other approaches; second, to explain the necessity in property law change put in context of new materials in e- commerce; third, to propose principles in future property law changes. The paper first presents regulatory necessity to innovations in financial technologies, including regulatory choices and approaches among governments around the world. After careful assessment to the choices, the paper proceeds discuss the regulatory trends and options applicable to Vietnamese regulatory context. Although the experimenting approach following a regulatory sandbox regime should be applicable in Vietnam, it should be operated in careful assessments and impact valuations. Within such context, the possibility of regulating new types of objects as property, including data and e-money is discussed. Affirmative opinion shall be delivered to applying new legal frameworks with rethinks in foundation legal terms including property right and proceeds to suggest principles in future legislative effort for fintech development enhancement. The solution should be building a regulatory sandbox in general to test and learn from effects of new regulations, the regulatory sandbox should be carried carefully with constant assessment and bias-prevention in law makers’ mind. Within such context, current property law regime should be modified by expanding its scope to embrace new possibilities make available by technology innovations, including industrial data and e-money. These implications serve to formulate a principle-based framework for future legislation works, to create a comprehensive law system which construes equilibrium between human right protection and freedom to business in Vietnam. 2. Regulatory trends: from FinTech to new forms of ownership 2.1. Law and FinTech: some justifications Before addressing the regulatory trends, it is necessary to pay attention to the features of applicable regulations into the FinTech field. Three features related to FinTech regulations are present as follow. It should be noted that the features are inexhaustive, 998
6. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM hence it is necessary to narrow down the narrative and focus on FinTech activities with data-driven characteristics. First, the law ought to present the features in utility and application of ICTs across industries, whether commercial or non-commercial. Eventually, the legislation upon ICTs ought to take their features into consideration, namely the diversity of ICT application to problem-solving, the utility it brings and the incomprehensibility of technology advancements (Amstad, 2019a). Second, the object of regulation should be subjective behaviors in the context of ICTs application. Lessig (2006) asserted that code, which stands for algorithm and program instructions has shaped and contributed to information technology law making. ICT users’ behaviors must follow the instructions, or the rules, set out primarily by coders and reflected in the application. For example, there are limited options for Facebook user to express emotional reactions to other users’ opinions or post, which are set out under symbolic icons such as “like”, “love”, “happy”, “angry”, “wow” or “sad”. In other words, Facebook designers/coders had limited other possibility of user emotional expression. Law, in this sense, should govern the behaviors of both the coders and the users in different phase of ICT applications. Third, end-users are often put in a disadvantageous position when it comes to ICT application in service providing. Such simple a rationale: the service providers who take active role in implicating ICTs into its activities would only do so to increase return value. To a greater extent, the replacement of traditional financial intermediaries with effects from herd mentality shall put consumer interest, business management and financial stability at risk (Knight, 2016; Lauren Saunders, 2019). In correspondence to the three features above, a principle-based approach to legislation is arguably preferrable from rules-based regulation. “Principle-based regulations” means promulgating a board set of principles and outcome-based regulations, in comparison with “rules-based regulations” which means detailed and predictive scenarios in regulations (Amstad, 2019a). Accordingly, there are at least three principles in technology regulations: legal certainty, technology neutrality and proportionality. Together, these principles create a smooth road for compliance convenience, reduce compliance cost all at the same time maintain the neutrality of law as a tool to adjust behaviors across all changes in objective conditions, which in this case stands for the rapid FinTech development. After all the law serves as a means to maintain justice and social order against any discrimination. 999
7. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM 2.2. Major regulatory trends to FinTech activities It is widely agreed that policy makers have not come to a consensus as to which extent and how the law should regulate FinTech activities. This resulted in various regulating scenarios applied to FinTech policy and law. World Bank (2020b) observed that there were four trends in regulatory framework applied to FinTech innovations, namely wait- and-see, test-and-learn, facilitating innovations and regulatory laws and reforms, in which the role of law makers ranked from passive outsider to active game changer. Most commonly, scholars have classified FinTech regulation trends into three synopses, namely: to ignore, to regulate in a “Duck Type” manner, and to regulate following the principle of “coding” (Amstad, 2019b; Hoàng Công Gia Khánh et al., 2020). The figure below addresses the three trends in relation to existing legal framework. Figure 1. Regulatory synopses in FinTech developments (Amstad, 2019b) As seen from the figure, the ignorance in regulating activities means a total passive attitude in policy making. This wait-and-see hypnosis are often taken by policy makers in the beginning period of new FinTech developments. Policy makers and legislators ought to fully assess and foresee the pros and cons such new technology brings in order to deliver effective regulations. However, this attitude may form blockage to FinTech activities because it does not follow the principle of legal certainty. FinTech actors do not know how to cope with the law, they want assurance from a legal framework with certain rules that ensure and encourage FinTech developments. “Duck-Type” regulation means proposing rules to govern based on the economic function, or risk of FinTech developments. This regulation hypnosis is principles-based instead of financial instruments, institutions or platforms based. The “code” approach requires complete rethinking of certain established norms and principles throughout the traditional financial 1000
8. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM legal framework. Rules are built upon new functions made available by technology transformation such as blockchain, smart contracts and their applications, along with risks created from such novel combination. Scholars and practitioners are calling policy makers to apply a “regulatory sandbox” as an experimental supervisory tool for future financial law making. The sandbox mechanism creates a virtual remoted space, where qualified firms and financial actors are designated to new, experimental regulations (Amstad, 2019b; Hoàng Công Gia Khánh et al., 2020; World Bank, 2020a). These FinTech players shall be able to deliver innovative ICT application along with new business models in the finance field, with careful supervision from the authorized organs. The time and scope for experiment is limited, assessment upon the regulation shall be delivered based on the result to which extent the problem, identify previously by regulators were solved. Whether the objectives delivered prior to the sandbox period were fulfilled is also a criterion for assessment (World Bank, 2020b). The common “life cycle” of a regulatory sandbox is shown by World Bank, as presented below. A suitable time period for assessment commonly lasted from 6-12 months, afterwards the participants are authorized with a license to apply new technology, experimental regulations would also come into state legislation process and expected to be promulgated. Figure 2. A typical sandbox lifecycle. (World Bank, 2020b) 1001
9. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM 2.3. Owning data in the fourth industrial revolution: aspects from the legal perspective The existing problem behind the noises towards gaining “data” a legal status came from the vagueness of a definition: we are struggling to draw a line between industrial data and personal data. Jeffrey Ritter and Anna Mayer (2017) proposed different meanings towards “industrial data” and “personal information” in this sense, recognizing the specialized domain where data is created, used and explored for sole commercial purposes thus any personal information is excluded from the connotation of this meaning. Accordingly, personal data contains information that could possibly help identifying the individual person as the subject from which it was drawn, such information does not have economic value as long as it is not processed under the digitalized form. However, the industrial internet enables companies to derive certain values from data and benefit from it (Davenport & Bean, 2018). According to Allied Market Research, in 2019, the global big data and business analytics market size was valued at $193.14 billion4. Data are no longer mere information in everyday social exchange. In the digitalized economy, it values. The question arises when interests between stakeholders are not properly addressed thus are there concerns about the unequal exploitation to the individual’s interest whose information are excessively processed for economy purpose. Both personal data and industrial data exists in a symbiosis manner, tempting their controllers from their intercrossing value and tackling exchange via both centralized and decentralized transactions. Owning data thus has become a subject of discussion. Many voices suggest that data should be granted a legal status, most likely a form of property. There are three arguments giving ground for this stream of opinions. First, the existence of data itself under certain physical or virtual forms makes it a probable object of legal relation in practice (Bergelson, 2003; Lessig, 2002; Malgieri, 2016b; Ritter & Mayer, 2017; Wagner, 2003). Second, data is more and more valuable in proportion to machine analytical and profiling ability, especially when it comes into relation with other pieces of digital data (Craig & Ludloff, 2011; Davenport & Bean, 2018; Higham, 2016; Hoeren, 2014; Malgieri, 2016a; Zetzsche et al., 2017). Third, the right to data control and use can be transferred from one legal subject to another, in correspondence to the feature of a “good” (Higham, 2016; Malgieri, 2016a; Malgieri & Custers, 2017). The debate has shifted towards a proper scheme to put data into place, many of which deploy an intellectual property law regime (Ballardini et al., 2019; Hoeren, 2014). 4 (accessed 21 Feb 2021). 1002
10. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM Currently, many voices agreed that either intellectual property right or a trade secret regime applied to industrial data should be effective to business activities by owning, making use and determining such use of data, however, data containing personal- identifiable information (PII) should be subjected to another level of protection based on agreement and transparency, with strings hooking to the data subject’s consent, where they can decide when and how to delete their information and opt-out of all relevant services provided on the basis of their PII (Bakhoum et al., 2018; Higham, 2016; Justickis, 2020; Malgieri & Custers, 2017). Despite ongoing debates in applying a regime of trade secret in data ownership, currently data ownership cannot be established in Vietnam due to following reasons: (1) The conditions for an object to be qualified as trade secret thus falling within the scope of intellectual property law protection are (a) It is not of regular knowledge thus is not easy to acquire; (b) it brings advantages to its owner compared to those who does not own or have authorization to use; (c) it is secured by necessary measures so that it cannot be easily accessed and approached. (PGS. TS. Trần Văn Nam & TS. Nguyễn Thị Hồng Hạnh, 2019). (2) Article 85 of the Intellectual Property Law provides that, secrets regarding to personal rights, governmental administration, state security and other business- irrelevant information are not subjected to be protected under intellectual property law. Information data can be constructed from personal information, indirect information and derivative information in the big data era (Malgieri, 2016a, 2016b). Which part of the industrial data set can be subjected to intangible property right protection and which does not? Current property law regime cannot provide an ultimate answer. Unfortunately, governments have scarcely made change to their existing property regime or putting efforts to redefining ownership regarding digital data. 2.4. E-money as property: why and how to cope with change The necessity in recognizing E-money as a form of property under Vietnamese property law has been proposed and discussed throughout in scholar papers. Generally, justifications of recognizing E-money as property are built on grounds of civil transaction validity and comprehensive market administration (Nguyễn Đình Phước, 2020; Nguyễn Minh Oanh et al., 2019; Nhung & Hanh, 2019; Trần Văn Biên & Nguyễn Minh Oanh, 2020). The obstruct in recognizing a property right lies in the nature of E-Asset or cryptocurrency in detail. It is clearly a digital object built on data and code, a good that is subjected to be owned and exchange for equivalent transaction costs in case ownership 1003
11. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM over data is to be recognized (Nguyễn Đình Phước, 2020). Empirical research even suggests that E-money possesses characteristics of a risk-preventing property, responses to monetary policy thus should be enlisted in financial investment list and be deemed as a property (Thu & Duong, 2020). However, if we regard E-money as an object thus subjected to the legal status of a “thing”, similar to a “Wu” (物) in Chinese or “vật” in Vietnamese, it cannot serve as a common parity like “money” do. In that sense, it only fulfills the function of a property as an exchanging good thus subjected only to the property law regime, falling outside the scope of monetary regulations (PGS. TS. Lê Vũ Nam, 2019). On theory, the law exists not to give official authorization to certain norms or phenomena. The main function of law is to recognize new phenomena on purpose of protecting justified interest of different stakeholders within a relationship so that justice shall be fulfill to the society. The law should be applied to govern all civil relationship, regardless of ownership nomination of E-asset. Government should not response to E- money in a restrictive manner just because of the lack in legal recognition, this is already proposed as a principle in law practice5. Civilians possessing E-money and the ability to trade them also deserve justice no less than others who do not. However, legalizing E-money based on the function of law is not effective enough to reach justice. Despite uncertainty on legal recognition, transactions with E-money takes place excessively. Such transactions contain even greater financial risks to consumers who are unfamiliar to finance and technology innovations. Proposing a legal framework for E-money recognition to govern their transactions shall bring benefit to economic participants thus striking market stability and minimize governing burdens (Nguyễn Minh Oanh et al., 2019; Nhung & Hanh, 2019). Legalizing E-money is thus an inarguable need. The question now shifts to how E- money should be addressed under current Vietnamese regulation framework following the regulatory trends in FinTech legislation. Upon cryptocurrency, governments vary in response, albeit efforts have been made to stabilize the internal and transnational markets. It is observed that there are four legislative trends among governments around the world: 5 Article 14 (2) of the Vietnamese Civil Code provides that “ courts may not refuse to settle a civil matter or case on reason that there is no provision of law to be applied”. In such case, law practitioners should apply other legal sources such as case law or customs, if these two sources are also missing, matters shall be solved following general principles of law. 1004
12. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM (1) to completely forbid its use and circulation; (2) to ignore the existence of cryptocurrency by giving no recognition in law and relevant legislative measures; (3) to give recognition in law without promoting its use and (4) to fully recognize and promote its use under specialized conditions and administrative procedures. Figure 3 presents the trend in cryptocurrency legislation around the world. States are placed between the axes for the illustration of their attitude on E-assets based on policy plans and legislative recognition, corresponding to the four mentioned legislative trends. The level of legal recognition towards E-Money is presented in the horizontal axis, with the recognizing level increasing from left to right. The vertical axis represents different governments’ practical attitudes towards E-money recognition and transactions, reflected in most recent strategic plan, ranking from the complete discouragement bottom all the way up to full promotion of its use. The states in survey are selected from Asia, Europe and North America, with which Vietnam enjoy similar legal system characteristics. Currently, no state has shown full recognition and promotion towards E-money in accordance with the (4) trend. China was among most notable states to completely forbid the use and transaction of cryptocurrency in 2018, however, the Central Bank of China rolled out their own digital currency followingly, known as eCNY with hope to take centralized control of all E-money forms (Nathaniel Popper & Cao Li, 2021). Vietnam is currently standing still on the (2) approach, while Singapore chose to follow the (3) path. Canada, Japan and Thailand are among the avant-garde states to take steps in recognizing the legal status of E-money, along with suitable procedures and administrative measures to better protect financial integrity and national monetary security (Inshyn et al., 2018; Nguyễn Minh Oanh et al., 2019). 1005
13. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM Figure 3. Regulatory trends to E-money among states. To promote To Japa Thailan Canad To recognize To forbid Germany To discourage To Franc Chin 3. FinTech Law: From Regulatory Sandbox to Property Law Reform 3.1. Efforts in Vietnam Fintech legislation As argued by scholars, arising from practical observation, currently Vietnam regulatory framework towards FinTech activities is insufficient and unclear (Hai Yen Nguyen, 2020). New laws regarding technology innovations have been promulgated ever since the 2000s and still in effect to date: Law on Digital Transaction (Law 51/2005/QH11), Law on Information Technology (Law 67/2006/QH11), Law on Cyberinformation Security (Law 86/2015/QH13) and Law on Cybersecurity (Law 24/2018/QH14), along with several sub- law documents which govern and regulate legal relations in the E-Commerce field (Decree 52/2013/NĐ-CP on E-Commerce, Decree 72/2015 on the management, provision and use of internet services and online information, etc.). On the other hand, regulations in the financial sector varies and has not addressed the ICT directly among statute lines. To date, the main regulation object in FinTech field focuses mostly on the payment sector, observed in Law on the State Bank of Vietnam (Law 46/2010/QH12), Decree No. 101/2012/ND-CP and Decree No. 80/2016/ND-CP on cashless payment and Circular No. 39/2014/TT-NHNN, Circular No. 20/2016/TT-NHNN and Circular No. 30/2016/TT-NHNN on intermediate payment services. 1006
14. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM Signals are raised for a proper framework regulating FinTech activity. The main voices are challenging the well-established rules in the technology field: financial institutions demand legal recognition to digital payment, crowdfunding, peer-to-peer lending and E-asset; financial newbies and demand for financial integrity and fair competition, while end-users want consumer protection including information privacy and transparency via legal instruments. On the superstructure, policy makers aim at protecting financial sovereignty and eliminate outlaw activities arisen from decentralized monetary exchange i.e. E-money laundering (Tran Van Long & Le Tan Quan, 2018). In fact, projects and programs have been deployed to cope with the transition: The Prime Minister issued Project on the science and technology application in the process of restructuring the industry and trade sector up to 2025, with a vision to 2030 promulgated with Decision No. 754/QD-TTg; The State Bank of Vietnam established the Steering Committee on Fintech under State Bank of Vietnam (SBV) according to Decision No. 328/QD-NHNN. Especially, regarding E-Money legal recognition, the Prime Minister proposed the Project on the improvement of legal framework on the management of virtual assets, digital currencies and virtual currencies promulgated with Decision No. 1255/QD-TTg, accordingly, new regulations are expected to be promulgated to manage and handle virtual assets (Hai Yen Nguyen, 2020). A recent interview between the State Bank of Vietnam Times and Dr. Chau Dinh Linh has somehow been a message: we should not apply the regulatory sandbox as a trend; it is more important to be cautious on risk, aiming towards a holistic legal framework (SBV-Ngân Hàng Nhà Nước, 2019). Scholars argue that regulatory sandbox should be an effective measure for FinTech law reform, because it creates a limited virtual space where applicants for experiment are subjected to innovative regulations following experimental policy for FinTech. Accordingly, within this “arboretum” there are selected subjects following a different legal framework within a short period of time, while law makers and policy planners shall deliver comparison to those similar determinants to FinTech field following the existing law framework (Hoàng Công Gia Khánh et al., 2020). Vietnam is already moving towards a regulatory sandbox paradigm for FinTech law. However, there are contrasting opinions. Hai Yen Nguyen casted doubt on the neutrality and inclusiveness of regulatory sandbox, asserted that it should only be applied periodically. Furthermore, the author agreed with Zetzsche et al. (2017) that for the long term, a formal approach including regulation reformed or new promulgation should be adopted (Hai Yen Nguyen, 2020). 3.2. Property law reform: what to expect? As discussed, rethinking the definition to “property” as a legal status is a must in the transformative time. On January 2021, Vietnam Prime Minister approved the “Project on 1007
15. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM Complete Institutionalize of Organizations and Personal Property Ownership Right recognized in the 2013 Constitution, ensure smooth transaction, effective implementation and protection to property right” following Decision 120/QD-TTg. This document can be regarded as the first ever official document to signal legal reform in the property law field. Current Vietnam Civil Code recognize the term “Property” by listing four respective types, namely objects, money, valuable papers and property rights (Article 105 of Civil Code). These types could be divided into movable and immovable property. Vietnam also recognizes intangible property like intellectual property and other “property rights” such as the right to make use of land, etc. The Decision 120/QD-TTg explicitly states that “Property Right”, as one among four recognized types of property shall be the main focus for property law reform. This implied that respective rights to the use and value- exploitation of data could be deemed as a legal right, subjected to intangible property. This could implicitly mean that data and E-money – two pillars to FinTech development shall not be regarded as an object for owning, instead, the right to access and take control, thus making use from data and cryptocurrency shall be given effect as a property right. If this approach is to be applied, following scenarios shall take place: ▪ Institutions could make use of not only the data they collected, but also the data derivate from algorithmic analytics. These data, combined with analytical technologies and profiling help financial firms to better assess risks from customers’ behaviors and reactions to certain social or economic events, help deliver better financial strategy and products. Risks can be better foreseen, credit shall be graded into scores, losses can be avoided more likely and effectively. ▪ E-Money shall not be money, in other words, E-Money shall be regarded as certain form of objects amidst forms of property. It can be owned, be exploited for value and be determined through legal or physical actions. However, it cannot fulfill the function of a medium of exchange, a unit of account or even a store of value. Whether this approach affects the financial markets and financial integrity falls outside the scope of this paper. However, in temporary it can be observed that this de-recognition of E-Money as a monetary instrument does not stop their supposed owners from mining, owning and exchanging them. It would only deepen and worsen the worry towards outlaw activities. ▪ Blockchain technologies shall be enhance and applied more in delivering financial solutions to very practical scenarios. Cryptocurrency, an already popular blockchain-based product, shall increase its presence in everyday transactions not as a medium of exchange but as an object for exchange. Blockchain technologies and the data attached to the blocks shall be a new technical mechanism for data 1008
16. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM protection, triggering even new behavioral rules which may demand more waves of legal reform. ▪ Large data markets should arise as a platform to exchange data and risk management experiences. The exchange of data shall follow certain rules to best balance different stakeholders’ interests, i.e., rules in the field of competition when it comes to economic activities, or rules regarding privacy and customer protection when it comes to personal data processing. Most importantly, principles should be set towards the good use of data exchanging, to enhance technological innovations and economic interest through collaboration. ▪ New financial order will surface following the appearance of new secondary markets. Data right or E-Money could even be deemed as an off-the-plan property, subjected to be exchanged in future contracts. Escalation of interest rate equals to the use of such right for security interests and their legal consequences should be taken into consideration as another predictive scenario for lawmakers. 3.3. Suggestions for principles in future property law reform A legal reform is irresistible. In the ever-changing time, law should be an effective tool to enhance justice and ensure essential freedom, including freedom to business and freedom to privacy. Keeping a balance between these essential values prove difficulties in various cases. The following principles are initially proposed in a predictive manner, based on the theory that law should plays the role of a ruler in adjusting behaviors, a standard-setter for respected norms in the society and a guardian of fundamental freedom, in the context of transforming Vietnam. ▪ Ensuring legislative comprehension in legal reform. Property law has been a subset placed under the civil law field, which scope includes property and personal right relations. Law regarding monetary liquidation and activities of financial institutions such as banks and financial service providers are regulated in the financial law field, which is often put under the legislative authority of the Ministry of Finance and the State Bank of Vietnam. If data determines the future of finance, it is essential to create a synchronized system of law regarding data and E-Money. ▪ Redefine the term “intangible property” to better cover current control and value acquisition practice towards data and E-Money. Intangible property often refers to the right to make use of land and intellectual property rights, without a clear and overall definition. Adding more objects into its scope would only increase the difficulties in legal comprehension and implementation. If narrowing the space between cognition and adaptability should be held an 1009
17. HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM important mission in shaping the fourth industrial revolution (Schwab & Davis, 2018), the law should also be easy to understand and implement by business actors and financial players from the private sector. ▪ Maintain social order through financial stability and cyberspace security. Enabling the free exchange to data and E-money (as an object or as a medium of exchange) requires stability in national liquidation. To do so, the role and authority of administrative organ should be legally stated in a clear manner. Security methods along with criminal and administrative regulations should be adjusted to include outlaw activities which attacks the eligible interest of citizens and end-users, especially in Gen-Z users, arguably to be the next generation pushing innovations further (A. M. Abu Daqar et al., 2020). After all, freedom comes with trust. If generations of citizens trust administrative authorities in monitoring smooth cashflow, with stable and trustable legal instruments, national finance stays healthy and balance even in a fluctuating era of digital transformation. 4. Conclusion After recognizing a virtual cyberspace where information and value are exchangeable thus create free flow across relevant E-Commerce actors, the paper points out the essential value integrated in data and other new forms of financial instruments. The paper agrees to previous scholar voices that (1) a regulatory sandbox regime would be suitable for testing the comprehension and implementation of new rules regarding FinTech innovations; (2) it is necessary to re-evaluate the legal status of “property” regarding industrial data, personal data and E-Money. Suggestions are delivered towards future property law reform to ensure the legal and financial integrity, including (a) ensuring the comprehension throughout the whole legal system; (b) redefine necessary legal terms regarding property to make law more understandable and easier for citizens to comply with; (c) implement new social order into laws and maintain security, moreover, to increase consumers’ faith in the financial system, making finance a desirable place for younger and younger generations who tends to put faith in FinTech, the next generation of finance. References A. M. Abu Daqar, M., Arqawi, S., & Abu Karsh, S. (2020). Fintech in the eyes of Millennials and Generation Z (the financial behavior and Fintech perception). Banks and Bank Systems, 15(3), 20–28. Amstad, M. (2019a). Regulating Fintech: Objectives, Principles, and Practices. ADBI Working Paper Series, 1016, 18. 1010
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