"Special seminar on Memorial Day for Thailand's Father of Law" by Central IP & IT Court, Panelist for "FinTech: Legal and Regulatory Challenges" (7 Aug 2019)

1. Kullarat Phongsathaporn | 7 August 2019
FinTech: Legal and regulatory challenges

2. The FinTech Ecosystem: Development and Trends
Open Banking
&
Collaboration
Blockchain Initiative
Digital
Assets
Regulatory
Sandbox
Deposit & Financing
 Digital bank & virtual bank
 Online financing
 Information-based lending
+ credit data analytics
 P2P Lending
Alternative Fundraising
 Digital token offering – ICO,
STO, IEO
 Equity Crowdfunding
 Debt Crowdfunding
 VC Investments
Alternative Investments
 Digital asset investments
 Equity & Debt Crowdfunding
 P2P lending
 Robo advisor
Capital Markets
 Digitalization of capital markets
 STO / Asset Tokenization
 Scripless securities
 Electronic trading platform
Payments & Remittance
 E-Payment
 Online money remittance
 Blockchain
 Cross-border initiatives
Collaboration
 Digital asset –
cryptocurrencies, stable coin
National
Digital ID
& e-KYC
The
FinTech
Ecosystem

3. Law and Technology
Laws directly relating to
technologies - applies
generally
Example
• Electronic Transaction Act
• Cybersecurity Act
• Computer Crime Act
Laws supervising businesses
relating to technologies -
applies to specific businesses
Example
• Royal Decree on Digital Asset
Businesses
• Payment Systems Act
Laws relating to technology
Role of laws in the digital era
“Protecting and Promoting”
Technology = Fast and ease
in doing business
Laws = Supervise and safeguard
the interest of the public
Guidance notes
Interpretative notes
Ruling
Q&A
Standards

4. AIMC
New law on digital
verification of identity
Equity/Debt crowdfunding
Equity/Debt crowdfunding
Equity/Debt crowdfunding
regulations
Equity/Debt
crowdfunding
regulations
FinTech Regulatory
Development in Thailand
2018-2019
July 2019
Data privacy law
Development of Market and Laws and Regulations in FinTech

5. Examples of ML/FT challenges regarding FinTech
A. Fraud and Ponzi scheme
(ICO, P2P lending, cryptocurrency, social network fund raising, etc.)
B. Challenges in doing e-KYC and e-authentication  guideline, digital ID
C. New players
• Digital asset businesses, P2P lending platform, crowdfunding platform
• Challenges – familiarity, resources, compliance cost
D. Collaboration projects
• Examples: FI + ride-hailing / FI + e-marketplace / FI + chat app / PSP + insurance 
inconsistency  level playing field
• Reliance on third parties or outsourcing?
• liability
• confidentiality & data privacy
• provide guideline to business partner
E. Cross-border elements
• variation in regulation (cross-border nature, global / regional policies  localize)
• harmonization / international collaboration / international standards prevent regulatory
arbitrage (FATF, Basel, EU's eIDAS, AEC Single Digital Market)
F. Data management
• What RegTech can do - automation of risk management, facilitate regulatory reporting,
prevent fraud, stay on top of regulatory changes
• Most common regtech is ID/document verification, digitized due diligence and
onboarding, transaction monitoring and authentication-based AML checks

6. Artificial Intelligence (AI) and FinTech

7. Artificial Intelligence (AI) and FinTech
MAS’ FEAT Principles
Fairness System doesn’t systematically disadvantage anyone;
decisions can be justified.
Ethics Decisions held to same ethical standards as human-
driven decisions.
Accountabili
ty
Application has internal (management) and external
(data subjects) approval.
Transparen
cy
Use is proactively disclosed.
7 requirements for AI systems
• human agency and oversight
• technical robustness/safety
• privacy and data governance
• transparency
• diversity, non-discrimination and fairness
• Societal and environmental well-being
• Accountability
EU presented Ethics Guidelines for
Trustworthy AI

8. What is a Smart Contract?
Legal
contract
Smart legal
contract
Smart
contract
code
Legal concerns
What contractual terms
should be automated?
 How should these
terms be expressed via
code?

9. Legal consideration re: Smart Contract
Not every clauses are desirable for automation and self-execution
Assessment of the efficiency and operational benefits (instead of just
being effective).
Adapted from Figure 4 in "Whitepaper Smart Derivatives Contracts: From Concept to Construction"
by ISDA and King & Wood Mallesons, October 2018.
Form a single
contract

10. E-Signature
Computer
code
Traditional VS Smart
contract
Binding contract
Pseudonymous of
the parties
Forum of
adjudication
Termination of
contract ?
Governing Law
No negotiation
among parties
Automate
Jurisdiction
Immutability
/
Amendment
Enforceability
Legal consideration re: Smart Contract

11. Regulated
underlying
Non–regulated
underlying
Traditional
securities
offering
STO /
Asset Tokenization
Existing
securities
To be announced
by the SEC
Regulated Exempted
Digital token Cryptocurrency
Regulated Exempted
Securities
• The Securities and Exchange Act
• The Emergency Decree on the
Specific Purpose Juristic Person for
Securitization
• The Trust for Transactions
in Capital Market Act
E-money / E-payment
The Payment Systems Act
Derivatives
The Derivatives Act
Digital assets
The Emergency Decree on Digital
Asset Businesses
Investment
token
Utility
token
Not ready-to-use
(B1)
Regulated
Ready-to-use
(B2)
Exempted
Others to be
announced by
the SEC
Investment
token
Utility
token
Asset
Tokenization
Digital tokens and laws
How to put a product into the right box?

12. FinTech Direction in Thailand
Regulator
• Adaptive Regulator
• Has prepared the
digital infrastructure
• Mixed use of tools
(SupTech/RegTech)
Operators
• Non-compliance is
not an option
• Continued
collaboration
between start-ups,
techs, and Fis
• Input for regulator
Users
• Protected consumer
rights
• Increase use of
consumer data
through continuing
trend of big data
analytics
Considerations in
practice
• data privacy
• cybersecurity / IT
security
• tax
• legal personnel

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© 2019 Baker & McKenzie Ltd.
Kullarat Phongsathaporn
Partner
Bangkok, Thailand
Tel: +66 2666 2824 ext. 3106
Email: Kullarat Phongsathaporn@bakermckenzie.com
Facebook page: fintechlaw