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71 Vand. L. Rev. 1167 (2018)
Regulating Fintech

handle is hein.journals/vanlr71 and id is 1211 raw text is: Regulating Fintech William Magnuson* The financial crisis of 2008 has led to dramatic changes in the way that finance is regulated: the Dodd-Frank Act imposed broad and systemic regulation on the industry on a level not seen since the New Deal. But the financial regulatory reforms enacted since the crisis have been premised on an outdated idea of what financial services look like and how they are provided. Regulation has failed to take into account the rise of financial technology (or fintech) firms and the fundamental changes they have ushered in on a variety of fronts, from the way that banking works, to the way that capital is raised, even to the very form of money itself. These changes call for a wide-ranging reconceptualization of financial regulation in an era of technology-enabled finance. In particular, this Article argues that regulators' focus on preventing the risks associated with too big to fail institutions overlooks the conceptually distinct risks associated with small, decentralized financial markets. In many ways, these risks can be greater than those presented by large institutions because decentralized fintech markets are more vulnerable to adverse economic shocks, less transparent to regulators, and more likely to encourage excessively risky behavior by market participants. The Article concludes by sketching out a variety of regulatory responses that better correspond to fintech's particular risks and rewards. INTRODUCTION.... ..................................................... 1168 I. W HAT IS FINTECH?.......................................................... 1173 A. Asset M anagem ent ............................................... 1175 B . Crow dfunding ...................................................... 1179 C. Virtual Currency .................................................. 1183 II. FINANCIAL REGULATION AND SYSTEMIC RISK........... 1187 A. Systemic Risk.......................... 1188 * Associate Professor, Texas A&M University School of Law; J.D., Harvard Law School; M.A., UniversitA di Padova; A.B., Princeton University. The author wishes to thank Howell Jackson, Donald Langevoort, Holger Spamann, Elisabeth de Fontenay, John Coyle, Rory Van Loo, Yesha Yadav, Michael Coenen, Jacob Eisler, Vanessa Casado Perez, and Jane Magnuson for helpful advice and guidance. 1167

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