A16: TFA and SEC | Negotiating contracts and FinTech Laws and Regulations (5 Sep 2020) - Week 2

© 2018 Baker & McKenzie Ltd.
FinTech Trends
2
Payments
Deposits &
Financing
Capital
Market
Investments
Capital
Raising
∙ e-Payment / Mobile Payment
∙ P2P Value Transfer Networks
∙ Cryptocurrencies
∙ P2P Lending
∙ Automated Lending
∙ Alternative Credit Adjudication
∙ Online invoice finance
∙ AI
∙ Automated Trading Platforms
∙ Blockchain and Smart Contracts
∙ Micro-Investing
∙ Social Trading Platforms
∙ Robo Advisor
∙ Equity crowdfunding
∙ Virtual Exchanges
∙ ICO

FinTech Ecosystem
3
Core
Fintech
Ecosystem
Financial Institutions FinTech Startups Venture Capital
Incubators/
Accelerators
Government Regulators
Research Institutes
Core
Fintech
Ecosystem
Universities
Core
Ecosystem
Facilitators
Facilitators
Source: Accenture FinTech Research 2018

FinTech Legal Framework
4

Financial licensing/regulatory landscape
5
a. Financial
Institution
Businesses Act
• Commercial bank
• Finance company
• Credit foncier
company
• Representative
office
• Section 5 (other
businesses relating
to public funding,
credit, financial
businesses
designated under
royal decree)
b. Securities
and Exchange
Act
• Securities broker
• Securities dealer
• Securities
underwriter
• Investment advisor
• Fund management
(mutual funds,
private funds,
provident funds)
• Venture capital
company
• Securities inter-
dealer broker
• Securities
borrowing and
lending
• Trustee
c. Derivatives
Act
• Derivatives agent
• Derivatives dealer
• Derivatives advisor
• Derivatives fund
management
d. Exchange
Control Act
• Authorized juristic
person
• Authorized person
• International money
transfer agent
• Treasury center
• Authorized
company

6
e. Payment
System Act
• E-money service
• credit card network service
• EDC network service
• transaction switching
service for payment (one
and multi systems),
• clearing service,
• settlement service,
• substitute payment / bill
payment / payment service
provider service,
• electronic payment service
through any device or
network
f. Life
Insurance Act /
Non-Life
Insurance Act
• Life / Non-Life insurance
companies
• Life / Non-Life insurance agent
• Life / Non-Life insurance
broker
g. Notification
of the
Revolution
Council No. 58
• Credit card
• Personal loan under
supervision
• Nano-finance
• e-Money card

7
h. Other financial
related businesses
• Special financial institutions
• Asset management companies
• Credit bureau
i. Emergency
Decree on Digital
Asset Businesses
• Issuers of digital tokens
• ICO Portals
• Digital Asset Exchange
• Digital Asset Broker
• Digital Asset Dealer

Electronic Transactions Act
8
Concepts: The ETA recognizes electronic data, methods of
dispatch and receipt of electronic data, use of electronic
signatures, and the evidential admissibility of electronic data.
Enforceability: The binding effect and legal enforcement of
any message cannot be denied merely on the ground that
the message is in the form of electronic data.
Formality or required evidence - if the message has been
made in or as electronic data that is accessible and can be
recovered for use without change of meaning, the message
will be deemed to have been made in writing.

Electronic Transactions Act
9
Electronic signature - Deemed signed if,
the method used can identify the owner of the signature and show that he has
certified the message in the electronic data as being his own; and
such method is trustworthy and suitable for the objective in making or transmitting
the electronic data with due regard to the prevailing circumstances or an agreement
by the parties.
Trustworthy electronic signatures (digital signatures)
the signature creation data is linked to the signature’s owner;
the signature creation data was, at the time of creating, under the control of the
signature’s owner;
any alteration to the electronic signature, made after the time of creating, is
detectable; and
where the purpose of the legal requirement for a signature is to provide assurance
as to the completeness and integrity of the message, any alteration made to that
message after the time of signing is detectable.

Summary of the draft data protection bill (May 2018)
10
The Thai Cabinet approved "in principle" the Personal Data Protection Bill (the "PDPB")
in January 2015. If the NLA endorses the PDPB, it will be passed into law. This would be
the first consolidated data protection law in Thailand.
Under the PDPB, personal data cannot be collected, used, or disclosed unless consent
is obtained from the data owner, and the transfer of personal data to other countries
must comply with a sub-regulation to be issued by the Data Privacy Committee.
Moreover, the data controller is also required to regularly perform a data protection
impact assessment.
Consent
• must be made in writing or through electronic systems, unless that method is not possible
by nature.
• the personal data controller must notify the personal data owner of the objective for the
collection, use, or disclosure of personal data.
• The Personal Data Protection Committee may require personal data controllers to request
consent from personal data owners in accordance with the form and statement to be
prescribed by the Committee.

© 2018 Baker & McKenzie Ltd. 11
Supporting FinTech
• FinTech department
• Regulatory sandboxes (BOT,
SEC, OIC, F13)
• Easing existing rules to
promote FinTech (e-KYC, e-
Marketplace, SMART visa)
• Registered capital reduction
for securities businesses
• Company structure and
operations (pending)
• Data accessibility (pending)
• FinTech Promotion Act
(pending)
• National Digital ID (pending)
Regulating FinTech
• Payment System Act (effective as
of April 16, 2018)
• Trusted mobile payment
• QR Code payment
• Equity Crowdfunding
• Insurance activities via electronic
channels
• Banking agents and banking
channels
• Emergency Decrees to regulate
digital asset-related transactions
(pending)
• ICO (pending)
• P2P lending (pending)
• Amendment to Credit Bureau Act
(pending)
• Draft Personal Data Protection Bill
(pending)
Supporting startup
ecosystem
• Tax incentives for registered
VC / PE trust
• Tax incentives for startups
• Relaxation of BOT’s
regulations on investing in
FinTech
• LIVE platform
• Draft Startup Act (pending)
FinTech Legal/Regulatory Landscape

Draft FinTech Act
12
Validity of
E-
transaction
Open Data
Non face-
to-face KYC
and CDD
Open
Anonymized
Data

Blockchain
and Laws

© 2018 Baker McKenzie
Current legal landscape
14
 Law is always playing catch-up
 Limited blockchain legal and regulatory developments
globally
 Regulators generally taking a ‘wait and see approach’
 Regulatory Sandboxes
 For now, apply existing law to each case
 Monitor legal developments
“The FCA continues to
monitor the
development of this
technology but is yet to
take a stance until its
application is clearer”
“Government needs to
consider regulatory
framework [for DLT].
Regulation will need to
evolve in parallel with
development of new
implementations and
applications”
“Unclear regulatory environment and
legal risks identified as key challenges
to DLT adoption”

 No one-size-fits-all approach
 Depends on use case and nature of technology (and, in particular,
whether public/private)
 Needs multi-disciplinary legal team
Blockchain and legal issues
15
“It depends”
 data privacy
 governing law and
jurisdiction
 who would regulate?
Issues which could be relevant include:
 regulatory compliance
 contract law
 consumer protection
 competition law
 corporate law
 securities law
 intellectual property
 dispute resolution

Practical legal considerations
16
IP Strategy
 New tech, but fast moving — wave of patents
 Emergence of industry standards would be helpful
How to contract for blockchain
 Analogies can be drawn
 Similar to any complex tech development/ service
project
Nature of contracts
 Consortium agreements
 Proof of concepts/pilots
 Consumer terms

Clauses for automation
Blockchain
SMART CONTRACT CODE
Legal
Agreement
Operational Clauses
• Have conditional logic
• Suited to automation and
self-execution
• i.e. upon occurrence of
specific time/event, an
action occurs
• e.g. A clause that requires
an amount to be payable on
a payment date equal to the
number of options exercised
multiplied by a strike price
differential
Non-Operational Clauses
• Do not require conditional
logic
• e.g. A clause specifying what
law should govern in the
event of any dispute
• e.g. A representation that a
party’s obligations under the
legal agreement constitute
legal, valid and binding
obligations

Legal considerations for blockchain
18
 validity and enforceability of tokens
 record-keeping requirements and evidentiary rules
 smart contracts
 what is smart contracts?
 when is contract executed / effective?
 legal terms subject to interpretation
 legal status of distributed autonomous organization
 data privacy / bank secrecy
 IT security / cyber security
 Situs
 AML/CTF
 industry standards / international standards
Blockchain

Specific legal issues for blockchain / DLT
 depends on specific products/services
• financial markets
 financial laws
 cryptocurrency
 exchange control
 tax
 regulations (e.g. SEC hearing on
 use of blockchain in ECF)
Blockchain / DLT

Cryptocurrencies and ICO

Cryptocurrencies and ICOs
21

22
ICOs

23
ICOs

Digital Assets in Thailand
24

25

26

27

28

29

30

The Changing FinTech Landscape
32
Trade secrets Open source
Competition
Jurisdiction specific
Closed
Unregulated
Collaboration
Cross-border
(borderless?)
Open infrastructure
Regulated markets
(and the rise of SROs)

Finding the Equilibrium Point
33
Financial
Market
Stability /
Integrity
Consumer /
Investor
Protection
Innovation

Keeping up with the pace of technological innovation
34
Migration to unregulated sectors, ML/TF, operational risks related to IT
cybercrime and cybersecurity, outsourcing risks, legal uncertainty
transparency vs. privacy, accountability
A Regulatory Approach to Fintech
Christine Lagarde, Managing Director of IMF
- Will a more decentralized financial system be
more stable, or less?
- Will risks be more dispersed?
- Will the diminished role of traditional
intermediaries mean that emerging risks are more
likely to go undetected?

FinTech Regulatory Trends
D: Data
• Open Banking – PSD 2
• Data Protection
• PDPB
• GDPR
C: Cybersecurity
• European Parliament's number one
priority
• shadow infrastructure – too connected
• cybersecurity and outsourcing rules
Support
• Sandboxes – global
regulatory sandbox
• Ease of existing rules
• Tax and sponsor Incentives
Holistic
Approach
• EC’s FinTech Action
Plan
• Draft FinTech Act
Cross-Border
• Divergence
• International
Cooperation
Rise of RegTech
• For regulators
• For FinTech players
A: AML/CTF
• e-KYC / e- Authentication
• FATF – cryptocurrencies
• NDID
B: Blockchain
• Blockchain
• no "one size fits all“
• Legal code VS Technical code
• Crypto Assets
• divergent but more strictly
regulated
“Regulation is not poison. Regulators are not always your enemies.”

Kullarat Phongsathaporn
Partner
Bangkok, Thailand
Tel: 02 636 2000 Ext. 3106
Email: Kullarat.Phongsathaporn
@bakermckenzie.com
For more information

A16: TFA and SEC | Negotiating contracts and FinTech Laws and Regulations (5 Sep 2020) - Week 2

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A16: TFA and SEC | Negotiating contracts and FinTech Laws and Regulations (5 Sep 2020) - Week 2