The New Global Financial Regulatory Order: Can Macroprudential Regulation Prevent Another Global Financial Disaster?

This Article posits that the success of macroprudential regulation will depend on four factors. First, the economic philosophy of the central banker in charge of the domestic institution with jurisdiction over macroprudential regulation will prove crucial in the implementation of adopted regulation. If, like Chairman Greenspan, the banker is averse to the exercise of the Central Bank\u27s regulatory oversight authority, then no amount or volume of policy or regulation will prevent or mitigate systemic risks and the accompanying shocks. Second, a sufficiently deep level of international cooperation is required to mitigate regulatory arbitrage, without being so broad that the ensuing harmonization of regulatory regimes will result in a homogenized global regulatory system that will possibly give rise to a productization of risk and therefore a far more rapid spread of systemic risk and shock. Third, the acceptance of macroprudential regulation by disparate domestic regulators will require a new guiding philosophy for the financial industry that will allow the macroprudential regulator the opportunity to meet its mandate and provide a foundation for system-wide success. Fourth, there needs to be a sufficient level of political willpower on the part of domestic legislatures and regulators in the face of what may be fierce opposition to macroprudential regulation by the largest and most politically powerful institutions the policy aims to supervise. To counter this, macroprudential regulation is primarily under the purview of the Central Bank, and therefore less prone to regulatory or political turbulence. To explore the present and possible future impact of macroprudential regulation, one must recognize the possible implications of the current regulatory proposals. One way to ascertain such information is to examine the strengths and weaknesses of macroprudential regulation as it is currently proposed and implemented. As such, this Article considers the possible opportunities and threats that lay ahead within a policy and regulatory framework that considers the economic, political, and international implications of macroprudential regulation proposals

How Data Protection Regulation Affects Startup Innovation

While many data-driven businesses have seen rapid growth in recent years, their business development might be highly contingent upon data protection regulation. While it is often claimed that stricter regulation penalizes firms, there is only scarce empirical evidence for this. We therefore study how data protection regulation affects startup innovation, exploring this question during the ongoing introduction of the EU General Data Protection Regulation (GDPR). Our results show that the effects of data protection regulation on startup innovation are complex: it simultaneously stimulates and constrains innovation. We identify six distinct firm responses to the effects of the GDPR; three where it stimulates innovation, and three where it constrains it. We furthermore identify two key stipulations in the GDPR that account for the most important innovation constraints. Implications and potential policy responses are discussed

Global Financial Regulatory Reforms:Implications for Developing Asia

The objective of global regulatory reform is to build a resilient global financial system that can withstand shocks and dampen, rather than amplify, their effects on the real economy. Lessons drawn from the recent crisis have led to specific reform proposals with concrete implementation plans at the international level. Yet, these proposals have raised concerns of relevance to Asia’s developing economies and hence require further attention at the regional level. We argue that global financial reform should allow for the enormous development challenges faced by developing countries—while ensuring that domestic financial regulatory systems keep abreast of global standards. This implies global reforms should be complemented and augmented by national and regional reforms, taking into account the very different characteristics of emerging economies’ financial systems from advanced economies. Key areas of development focus should be (i) balancing regulation and innovation, (ii) establishing national and cross-border crisis management and resolution mechanisms, (iii) preparing a comprehensive framework and contingency plan for financial institution failure, including consumer protection measures such as deposit insurance, (iv) supporting growth and development with particular attention to the region’s financial needs for infrastructure and for SMEs, and (v) reforming the international and regional financial architecture.financial regulatory reform; global financial architecture; G-20; Asia; national and regional reform

E Pluribus Unum – Out of Many, One Common European Sales Law?

In light of the fragmentation due to the nationalization of civil and commercial law and the growing intensity of cross-border trade in manufactured goods, arguments for the unification of private law surfaced already from the early 20th century. Such attempts resulted in, among others, the CISG, the UPICC or the PECL. In line with this pattern, as an attempt to make Out of Many, One Common European Sales Law, a Proposal for a Regulation on a Common European Sales Law (CESL) was published in 2011. The aim of the present contribution is to explore the background of the Proposal and to assess its significance for the future, with specific attention to the challenges of the digital age. Section I of the paper provides an overview of the process in the first decade of the 21st century leading to the publication of the Proposal, identifying the various stages of making an instrument. This is followed by the description of the Proposal and its evaluation in Section II. Although the immediate implementation and application of the instrument are not feasible, the text contains some promising elements to build on. According to the main findings of the paper, in the new millennium no longer merely international trade in manufactured goods is a chief factor triggering the implementation of international instruments of contract law. The innovations which pose new challenges and regulatory needs, also addressed in the CESL, are trade in digital content and e-commerce. Considering a digital key to the success of regulatory aspirations, the paper thus outlines ways European and international legislation might go in terms of regulating cross-border trade in the age of information technology. Accordingly, the areas to focus on for a start are transactions for the supply of digital content and e-commerce transactions

Implementing a data protection impact assessment for the web-application on the piloting phase

Abstract. The General Data Protection Regulation (GDPR) contains several obligations for the ones that are processing personal data of the EU citizens. The major obligations are to take data protection by design and by default, and to carry out a data protection impact assessment (DPIA) whenever there is a high risk to breach privacy. Some organizations and companies are still struggling to achieve these obligations. Violating these obligations may cause sanctions that are up to 4% of the annual turnover. This created the motivation to research how these obligations should be implemented to achieve better compliance with the GDPR. The objective of this thesis work was to research how the GDPR should be considered in applications that are processing personal data. Based on the related work, it was possible to recognize that DPIA process was recommended to cover the obligations of the GDPR. Therefore, the purpose was to research how the DPIA process would affect to the case application. Case application was a web-application that was on the piloting phase. Design science research was applied as a research method. It was decided to carry out a DPIA by applying the guidelines of the Information commissioner’s office (ICO). The DPIA process was applied to the case application. After the DPIA was completed, it was possible to evaluate its impact on the case application. Evaluation was completed in three parts, by evaluating how well the process of the DPIA covered the requirements of the GDPR, by evaluating the technical advantages and costs of the process, and by evaluating how the DPIA was applied in practice. The results of this thesis showed that applying the DPIA process improved data protection, privacy and technical features of the case application. It was possible to reduce the privacy risks associated with data processing activities. In addition, DPIA process improved the technical side of the case application. The data model was simplified and unnecessary information flows were eliminated. These improvements were estimated to increase the workload of the developers for 2.7%. This meant that DPIA process was suitable way to cover the obligations of the GDPR

The Promise of Internet Intermediary Liability

The Internet has transformed the economics of communication, creating a spirited debate about the proper role of federal, state, and international governments in regulating conduct related to the Internet. Many argue that Internet communications should be entirely self-regulated because such communications cannot or should not be the subject of government regulation. The advocates of that approach would prefer a no-regulation zone around Internet communications, based largely on the unexamined view that Internet activity is fundamentally different in a way that justifies broad regulatory exemption. At the same time, some kinds of activity that the Internet facilitates undisputedly violate widely shared norms and legal rules. State legislatures motivated by that concern have begun to respond with Internet-specific laws directed at particular contexts, giving little or no credence to the claims that the Internet needs special treatment. This Article starts from the realist assumption that government regulation of the Internet is inevitable. Thus, instead of focusing on the naive question of whether the Internet should be regulated, this Article discusses how to regulate Internet-related activity in a way that is consistent with approaches to analogous offline conduct. The Article also assumes that the Internet\u27s most salient characteristic is that it inserts intermediaries into relationships that could be, and previously would have been, conducted directly in an offline environment. Existing liability schemes generally join traditional fault-based liability rules with broad Internet-specific liability exemptions. Those exemptions are supported by the premise that in many cases the conduct of the intermediaries is so wholly passive as to make liability inappropriate. Over time, this has produced a great volume of litigation, mostly in the context of the piracy of copyrighted works, in which the responsibility of the intermediary generally turns on fault, as measured by the intermediary\u27s level of involvement in the challenged conduct. This Article argues that the pervasive role of intermediaries calls not for a broad scheme of exoneration, premised on passivity, but rather for a more thoughtful development of principles for determining when and how it makes economic sense to allocate responsibility for wrongful conduct to the least cost avoider. The Internet\u27s rise has brought about three changes that make intermediaries more likely to be least cost avoiders in the Internet context than they previously have been in offline contexts: (1) an increase in the likelihood that it will be easy to identify specific intermediaries for large classes of transactions, (2) a reduction in information costs, which makes it easier for the intermediaries to monitor the conduct of end users, and (3) increased anonymity, which makes remedies against end users generally less effective. Accordingly, in cases where intermediaries can feasibly control the conduct, this Article recommends serious attention to the possibility of one of three different schemes of intermediary liability: traditional liability for damages, takedown schemes in which the intermediary must remove offensive content upon proper notice, and \u27hot list schemes in which the intermediary must avoid facilitation of transactions with certain parties. Part III of this Article uses that framework to analyze the propriety of intermediary liability for several kinds of Internet-related misconduct. This Article is agnostic about the propriety of any particular regulatory scheme, recognizing the technological and contextual contingency of any specific proposal. Because any such scheme will impose costs on innocent end users, selecting a particular level of regulation should depend on policymakers\u27 view of the net social benefits of eradicating the misconduct, taking into account the intermediaries\u27 and innocent users\u27 compliance costs associated with the regulation. Still, the analysis of this Article suggests three points. First, the practicality of peer-to-peer distribution networks for the activity in question is an important consideration because those networks undermine the regulatory scheme\u27s effectiveness, thereby making regulation less useful. Second, the highly concentrated market structure of Internet payment intermediaries makes reliance on payment intermediaries particularly effective as a regulatory strategy because of the difficulty illicit actors have in relocating to new payment vehicles. Third, with respect to security harms, such as viruses, spam, phishing, and hacking, this Article concludes that the addition of intermediary liability in those cases is less likely to be beneficial because market incentives appear to be causing intermediaries to undertake substantial efforts to solve these problems without the threat of liability

Bitcoin Governance as a Decentralized Financial Market Infrastructure

Bitcoin is the oldest and most widely established cryptocurrency network with the highest market capitalization among all cryptocurrencies. Although bitcoin (with lowercase b) is increasingly viewed as a digital asset belonging to a new asset class, the Bitcoin network (with uppercase B) is a decentralized financial market infrastructure (dFMI) that clears and settles transactions in its native asset without relying on the conventional financial market infrastructures (FMIs). To be a reliable asset class as well as a dFMI, however, Bitcoin needs to have robust governance arrangements; whether such arrangements are built into the protocol (i.e., on-chain governance mechanisms) or relegated to the participants in the Bitcoin network (i.e., off-chain governance mechanisms), or are composed of a combination of both mechanisms (i.e., a hybrid form of governance). This paper studies Bitcoin governance with a focus on its alleged shortcomings. In so doing, after defining Bitcoin governance and its objectives, the paper puts forward an idiosyncratic governance model whose main objective is to preserve and maximize the main value proposition of Bitcoin, i.e., its censorship-resistant property, which allows participants to transact in an environment with minimum social trust. Therefore, Bitcoin governance, including the processes through which Bitcoin governance crises have been resolved and the standards against which the Bitcoin Improvement Proposals (BIPs) are examined, should be analyzed in light of the prevailing narrative of Bitcoin as a censorship-resistant store of value and payment infrastructure. Within such a special governance model, this paper seeks to identify the potential shortcomings in Bitcoin governance by reference to the major governance crises that posed serious threats to Bitcoin in the last decade. It concludes that the existing governance arrangements in the Bitcoin network have been largely successful in dealing with Bitcoin’s major crises that would have otherwise become existential threats to the Bitcoin network

Global Financial Regulatory Reforms: Implications for Developing Asia

The objective of global regulatory reform is to build a resilient global financial system that can withstand shocks and dampen, rather than amplify, their effects on the real economy. Lessons drawn from the recent crisis have led to specific reform proposals with concrete implementation plans at the international level. Yet, these proposals have raised concerns of relevance to Asia’s developing economies and hence require further attention at the regional level. We argue that global financial reform should allow for the enormous development challenges faced by developing countries—while ensuring that domestic financial regulatory systems keep abreast of global standards. This implies global reforms should be complemented and augmented by national and regional reforms, taking into account the very different characteristics of emerging economies’ financial systems from advanced economies. Key areas of development focus should be (i) balancing regulation and innovation, (ii) establishing national and cross-border crisis management and resolution mechanisms, (iii) preparing a comprehensive framework and contingency plan for financial institution failure, including consumer protection measures such as deposit insurance, (iv) supporting growth and development with particular attention to the region’s financial needs for infrastructure and for SMEs, and (v) reforming the international and regional financial architecture.published_or_final_versio

The Paranoid Style in Regulatory Reform

The U.S. administrative state has been involved in a decades-long regulatory reform project encompassing a shift away from what have been characterized as “command-and-control” approaches to regulation and toward approaches that are more market oriented, managerial, participatory, and self-regulatory in their orientation. Through a content analysis of the nearly 1400 law review articles that comprise the legal critique of regulation between 1980 and 2005, I show that the most salient critiques of regulation concern neither its cost nor its inefficiency, as many have assumed. Instead, they express a deep-seated anxiety about the fundamentally coercive nature of administrative government. In addition, I demonstrate that “voluntary” or “self-regulation” approaches that enlist regulated entities and citizens to perform core governmental functions like standard setting, monitoring, and enforcement emerged from the reform debate with particular prominence. Using both statistical and interpretive inference, I argue that framing regulation as a problem of coercive state power created a logic of governance uniquely suited to self-regulatory solutions that promised noncoercive ways of governing. I situate my empirical analysis in historical context, highlighting its continuities and discontinuities with the coercive- state rhetoric that has infused debates about expanded federal governance throughout U.S. history: at the Founding, during the New Deal, and in the postwar period. Drawing on these empirical and historical analyses, I argue that proponents of government regulation must recognize and engage the deep and abiding anxiety about state coercion. Before a convincing and durable case can be made for any particular regulatory policy, a case must be made for the state