Fintech and the Innovation Trilemma

107 Georgetown Law Journal 235, 2019

Vanderbilt Law Research Paper No. 17-46

Georgetown Law and Economics Research Paper No. 11-23

73 Pages Posted: 19 Oct 2017 Last revised: 18 Jul 2019

See all articles by Chris Brummer

Chris Brummer

Georgetown University Law Center; Institute of International Economic Law (IIEL)

Yesha Yadav

Vanderbilt University - Law School

Date Written: October 17, 2017


Whether in response to robo advising, artificial intelligence, or crypto-currencies such as Bitcoin, regulators around the world have made it a top policy priority to supervise the exponential growth of financial technology (or “fintech”) in the post-crisis era. However, applying traditional regulatory strategies to new technological ecosystems has proved conceptually difficult. Part of the challenge lies in managing the trade-offs that accompany the regulation of innovations that could, conceivably, both help and hurt consumers as well as market participants. Problems also arise from the common assumption that today’s fintech is a mere continuation of the story of innovation that has shaped finance for centuries.

This Article offers a new theoretical framework for understanding and regulating fintech by showing how the supervision of financial innovation is invariably bound by what can be described as a policy trilemma. Specifically, we argue that when seeking to provide clear rules, maintain market integrity, and encourage financial innovation, regulators have long been able to achieve, at best, only two out of these three goals. Moreover, today’s innovations exacerbate the trade-offs historically embodied in the trilemma by breaking down financial services supply chains into discrete parts and disintermediating traditional functions using cutting edge, but untested, technologies, thereby introducing unprecedented uncertainty as to their risks and benefits. This Article seeks to catalogue the strategies taken by regulatory authorities to navigate the trilemma, and posits them as operating across a spectrum of interrelated responses. The Article then proposes supplemental administrative tools to support not only market, but also regulatory experimentation and innovation.

Keywords: Fintech, financial regulation, algorithms, big data, intermediaries, securities, exchanges, Bitcoin, digital intermediaries, robo-advising, ICO, crowdfunding, platforms, P2P Lending, investor protection, Rule 10b-5, innovation, market integrity

Suggested Citation

Brummer, Christopher J. and Yadav, Yesha, Fintech and the Innovation Trilemma (October 17, 2017). 107 Georgetown Law Journal 235, 2019 , Vanderbilt Law Research Paper No. 17-46, Georgetown Law and Economics Research Paper No. 11-23, Available at SSRN: or

Christopher J. Brummer

Georgetown University Law Center ( email )

Washington, DC 20057
United States


Institute of International Economic Law (IIEL) ( email )

Georgetown University Law Center
600 New Jersey Avenue, NW
Washington, DC 20001
United States


Yesha Yadav (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

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