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We’re All in This Together – The Value of Associations in Fintech

By James Baty, Senior Vice President at US Capital Global.


In any industry there are groups / associations where individual entities come together to create a larger consensus on technology, practices, regulation, and education

The financial industry is replete with many forms of trade associations some of which become regulatory bodies such as FINRA in the US. When there is a technology inflection point, like the current wave of financial technology innovation, then the charters of existing groups and regulators may be biased towards existing technology and practices. And the members of these stakeholders may be primarily experts in the previous generations of technology. 

With a significant evolution in the industry, and innovative technology that causes significant potential disruption, new associations and groups will likely emerge to bring experts in the evolving technology together, to focus on key questions of implementation and practices. Fostering these groups is of interest not just to the industry, but to the regulators and lawmakers, who need to adapt to the emerging innovation. One of their mandates is to foster collective practices that bring the best from the current regulatory and transactional system to the possibility of a more efficient and innovative future.  

Digital broadcast, Cellular telephony, Electronic payments, Crowdfunding are all areas where the affected industry develops many new trade groups and associations to develop technology standards, collaborate with regulators and contribute to emerging business practices. Let’s consider some of the types of new associations in Fintech and their different goals.


The emergence of Digital Ledger Technology and Digital Securities clearly has the potential to add significant efficiency to capital markets practices. Governments and regulators are interested in innovation for several reasons. Increased technological efficiency in capital markets promises to foster more rapid economic development, certainly a governmental priority. Regulators must avoid new potential abuses, but at the same time not stifle the common desire for expanding economic growth and broader public participation in that growth. Vendors are eager to contribute to emerging standards, and industry practitioners are eager to understand how the technology may affect or improve their business practices. 

Regulators are specifically reaching out to encourage this thoughtful financial industry innovation. In the US the Securities Exchange Commission (SEC) has established the FinHub function to explicitly to interact with the financial industry on technical innovation. The Commodities Futures Trading Commission (CFTC) has a similar function, the Lab CFTC -Guide Point. In the UK the Financial Conduct Authority (FCA) has an ongoing Regulatory Sandbox program to encourage and guide financial innovation. The sandbox function seeks to provide firms the ability to test products and services in a controlled environment and support in identifying appropriate consumer protection safeguards. Around the world, other governments of various financial centres have, in the course of evaluating how to approach digital securities technology, established many similar programs to encourage and guide the development of new Fintech. 

On the industry side, technology developers, industry incumbents and financial professionals have developed a large number of new different types of associations, whose missions include regulatory and policy outreach, collaborative development of platform technology, development of industry standards and practices, and solving some of the problems of interoperability of Fintech products. 


Industry Associations 

Faced with regulator attention and the need to clarify regulation, the new technology innovators come together to collectively influence public policy. Examples include the Blockchain Association (members include e.g., Coinbase, Circle, Protocol Labs) and the Digital Asset Trade Association. These types of groups are primarily concentrated on tech vendors, and focused on representing the underlying technology, lobbying regulators and public policy makers on industry issues. There’s now a plethora of similar groups, The US Blockchain Assoc., the British Blockchain Assoc., the Nordic Blockchain Assoc., the Government Blockchain Assoc., mostly concentrated on similar policy issues in their respective geographies, sometimes involved in specific standards and interoperability projects, and in some areas working with academic researchers.

“The emergence of Digital Ledger Technology and Digital Securities clearly has the potential to add significant efficiency to capital markets practices.”

Platform development associations 

Collaborative technology development – Beyond public policy and regulatory issues, industry associations are critical to elaborating common technology platforms. Hyperledger (members include e.g., IBM, Intel, R3, DTCC, J.P. Morgan, Symbiont) is a notable example – an umbrella group of open source projects started by the Linux Foundation.  This includes both large incumbents and small innovators working on toolkits, ecosystems, smart contracting terms, and implementation standards, essentially a technical collaboration.

Technical Platform Specification – The Fintech revolution offers the potential efficiency of executing of secure digital transaction, but also offers more significant technical advances in algorithmic execution of ‘smart contract’ terms, terms that have to be collectively defined. The Ethereum Foundation, and the Enterprise Ethereum Alliance groups are focused on establishing language and extensions standards. Bringing to Fintech the open source model popular in software development, an Ethereum Improvement Proposal (EIP) is a design document providing information to the Ethereum community or describing a new feature for Ethereum or its processes or environment. The current ERC catalogue includes ~58 final and ~150 draft, EIP specifications these include basic execution functionality, smart contracting terms, vendor interface specifications. 

Associations / groups focused on Industry interoperability

While technical platform specification naturally implies some level of technical interoperability, there is also the need for higher level business interoperability. For example, where can digital securities be traded? Initially digital securities for private placements are basically traded on captive markets – you offer the securities on the specific token platform vendor’s environment. But many issuers would like broader offerings on multiple exchanges, perhaps spanning multiple geographies and jurisdictions. And while the viability of digital secondary markets has yet to be fully demonstrated, investors and issuers show increasing interest in secondary trading on multiple Alternative Trading Systems (ATSs). Digital tokens created by one issuer, may be desired to be listed on different exchanges, and be able to be traded on secondary exchanges. 

Industry interoperation / standards associations / groups – One example of a cross vendor trading environment is proposed by Blocktrade, formed late in 2018. Blocktrade, is an ‘association’ of a number of token platforms into a common platform. Members include Securitize, Neufund, Tokeny, and Highcastle, and this effort is creating standards to enable cross listing of tokens issued by the members on a unified exchange. 


Clearly technical specifications and regulator public policy issues are important early functions of industry associations, but in the longer-term successful adoption involves not just the technology vendors and digital platforms, but also includes how the existing industry professionals (Broker Dealers, Custodians, Lawyers, Transfer Agents, KYC/AML Services, etc.) adopt the technology to evolving business practices. 

Example business practices issue – Digital Security Custody

In traditional security sales there is provision for a custodian to hold shares privately or in a ‘street name’. The owner does not have to take physical delivery of the shares, and future transactions are not delayed by physical transfer. How do digital securities change this? One simple argument is that the share owner holds the keys to the wallet containing the digital share and this constitutes the equivalent of ‘self custody’. 

“Beyond public policy and regulatory issues, industry associations are critical to elaborating common technology platforms.”

But more fluid markets are based on intermediary transactions and certain classes of investors (e.g., institutional funds) require a custodian function. There are also operational security issues around very large volume transactions. An alternative technical proposal is to implement custodian services on ‘multisignature’ tokens, where the custodian or transfer agent has an additional signature and the transaction scheme may require 1of2, 2of2, 2of3 signatures etc. to transfer. Other providers are implementing more traditional schemes of auditable custody rules, but where the broker-dealer, custodian and exchange are linked. 

In general, while the regulators suggest that the technology does not change the basic law, the technology may make multiple alternatives possible for new business practice elaborations and functions. Who should decide this? Ideally it is the licensed and regulated industry professional ecosystem, working together through some form of association. In the existing securities market the general US model for industry self-regulation is FINRA (Financial Industry Regulatory Authority) a not-for-profit organisation authorised by Congress to protect America’s investors by writing and enforcing broker-dealer industry self regulation. How can the industry elaborate new business practices enabled by the new technology? What follows are two ways in which industry practitioners may collectively address some of these new business practices issues.

Industry membership org. for practices and innovation

This publication, The Fintech Times is launching a Members Organisation for Fintechs + Finance. The working title is “Fintech Ambassador Club (FAC)” – there are quarterly events planned in four geographies (16 events a year), to cover most verticals in fintech not just focused on digital securities. This will expand the publications industry support to an ongoing membership organisation for collaboration and direct participation in providing solutions to some of these challenges.

Digital securities ecosystem self organisation 

The evolution of the custody function is an example of the need to have an ‘association’ of multiple disciplines to support operational standards, education and self-regulation of the overall digital security ecosystem (BD, Issuer, Token platform, KYC/AML, etc.). This would focus on the business practices, and larger issues of the ecosystem, and perhaps take the form of self regulating practitioner group (similar to how FINRA works). Such a group can link the industry practitioners with connections to the newly formed regulatory liaisons. Our firm, US Capital Global is conducting conversations with several of our clients and partners, to promote an association response to our evolving collective business practices.

“Fintech innovation requires industry collaborations to be successful.”


This is just a small sample of different types of Fintech / Digital Security groups and associations. They specifically give examples across a spectrum ranging from technology vendors and open source groups, to collective exchanges and the professional practitioner ecosystem addressing business practices. The larger point is that Fintech innovation requires industry collaborations to be successful. Some of the groups formed in this phase may disappear or merge. 

Eventually the immediate need for Fintech associations may gradually merge back into evolved versions of the larger traditional general industry groups and public policy forums. For example, in January of this year the World Economic Forum announced at their annual meeting Davos a Global Council on Blockchain, and in the UK the Ditchley Foundation recently held a Ditchley 100 Roundtable discussion on The Future of Financial Service 

These various Fintech focused associations are critical to this phase of elaborating both the technical standards, and the effect on business practices. 


  • Editorial Director of the The Fintech Times

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