Fintech and the Innovation Trilemma

Georgetown Law Journal, 2018 Forthcoming

Vanderbilt Law Research Paper No. 17-46

Georgetown Law and Economics Research Paper No. 11-23

65 Pages Posted: 19 Oct 2017 Last revised: 24 Apr 2018

See all articles by Chris Brummer

Chris Brummer

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

Yesha Yadav

Vanderbilt University - Law School

Date Written: October 17, 2017


Whether in response to roboadvising, artificial intelligence, or crypto-currencies like 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 proven conceptually difficult. Part of the challenge lies in the tradeoffs involved in regulating innovations that could conceivably both help and hurt consumers and market participants alike. 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 provides a novel 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, two out of the three goals. Moreover, today's innovations exacerbate the tradeoffs historically embodied in the Trilemma by either reconfiguring or disintermediating traditional financing operations and the discrete services supporting them, thereby introducing unprecedented uncertainty as to their risks and benefits. This Article thus proceeds to catalogue the strategies taken by regulatory authorities to navigate the Trilemma, and posits them as operating across a spectrum of interrelated responses. It then proposes supplemental administrative tools to support not only market, but also regulatory data gathering and experimentation.

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). Georgetown Law Journal, 2018 Forthcoming; 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


The Institute of International Economic Law (IIEL) ( email )

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


Atlantic Council ( email )

1101 15th Street, NW
11th Floor
DC 20005
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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