HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TOÀN CẦU VÀ CHIẾN LƯỢC CỦA VIỆT NAM 994 1Huynh Thien Tu* Abstract Technology developments motivated financial service actors to rethink how[.]
HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TỒN 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, cryptoassets 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 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 HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TỒN 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 not find themselves communicating to the machine, but to other collective users (Wellman et al., 1996) Screens 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 layers 2, 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 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 HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TỒN 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 See Hoeren D.T (2014) Big Data and the Ownership in Data: Recent Developments in Europe European Intellectual Property Review, 36(12), 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 HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TỒN 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 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 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 HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TỒN 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 ecommerce; 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 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 HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TỒN 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 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 HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TỒN 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 waitand-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; Hồng Cơng Gia Khánh et al., 2020) The figure below addresses the three trends in relation to existing legal framework Figure 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 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 HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TỒN 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; Hồng Cơng 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 A typical sandbox lifecycle (World Bank, 2020b) 1001 HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TỒN 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 billion 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) https://www.alliedmarketresearch.com/big-data-and-business-analytics-market (accessed 21 Feb 2021) 1002 HỘI THẢO KHOA HỌC QUỐC GIA ĐỊNH HÌNH LẠI HỆ THỐNG TÀI CHÍNH TỒN 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 personalidentifiable 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 businessirrelevant 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 ... 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... 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... 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