Focus on: Innovation and Transformation in Financial Services Law

Taking Risk

After spending close to fifteen years working in senior legal and regulatory positions in the traditional financial services industry at large banks with tens of thousands of employees, I decided to leave my comfort zone and join the fast-evolving fintech industry where the venture I would be joining was a start-up that had only 30 people, despite its big tech and other prominent commercial company investor backing. As I pondered the change, I relished the opportunity to work on creating something that was focused on the future which could potentially have real tangible benefit to society rather than spending my legal and regulatory expertise on dealing with legacy problems that often related to prior breaches of law and regulations which resulted in regulatory investigations and enforcement actions.

My responsibilities as general counsel are similar to those of other firms and include advising executive management and board on an extensive variety of legal matters and providing legal support with respect to various corporate transactional, governance, commercial and regulatory matters. However, what was truly unique about being general counsel was the opportunity to impact core design features of the Diem payment network and digital currency and to engage with regulators on novel areas of law and regulation.

Having Impact

Diem actively sought to be regulated and have, as core design features, stringent consumer protection measures, AML, and privacy controls while at the same time providing a low cost, efficient and transparent means of payments. Digital assets and financial transactions processed by blockchain technology do not necessarily fall squarely within established regulatory frameworks. As such, I had the ability to interpret these requirements, as a matter of first instance, and their applicability to Diem’s planned activities. Fortuitously, Switzerland has one of the most developed regulatory frameworks for fintech firms and digital assets and as a result, Diem had a clear understanding of applicable regulatory requirements.

As general counsel, I worked extensively on obtaining the payment system operator license from FINMA. The license application and related processes involved extensive engagement not only with FINMA but as well 20 other regulators through various Regulatory Colleges arranged my FINMA. Notwithstanding, clarity on the required regulatory license for Diem’s planned activities, a number of legal questions that arose were of first instance, for example, how is settlement finality established for digital currency transactions processed by the Diem blockchain.

The responses to this question required a thorough understanding of the operational processes of the technology and their interrelation to the contractual agreements and payment system rules which establish the pre-requisite of irrevocability followed by settlement finality. The era of innovation and disintermediation in financial services and payments presents tremendous opportunities for lawyers who are intellectually curious, have an interest in influencing developing areas of the law and regulations and seek purpose. Take the plunge; the shallow side will still be there to go back to.