ANTON N. DIDENKO, University of New South Wales (UNSW) - Faculty of Law
Email: anton.didenko@unsw.edu.au
ROSS P. BUCKLEY, University of New South Wales (UNSW) - Faculty of Law
Email: ross.buckley@unsw.edu.au

Many Pacific island countries are among the world’s most remote and geographically dispersed. As such, financial inclusion remains a major challenge, with many in the region still lacking access to financial services. This policy brief considers whether central bank digital currencies (CBDCs) can promote the accessibility of financial services across the Pacific islands and the design choices involved in their development.

The brief suggests that CBDCs may offer a highly efficacious solution to (i) the problem of high remittance costs that currently serve as a tax on the earnings of Pacific islanders abroad when they send money home, and (ii) the financial inclusion challenges of the region. However, implementation of these digital currencies is a significant challenge.

The CBDC is a complex piece of software and a complex digital framework capable of generating both economy-wide benefits and shocks. The establishment and operation of a CBDC by any Pacific country will require considerable expertise and a deep understanding of the designs and issues this fundamentally new form of currency gives rise to in the local context. The development of a safe, efficient, and accessible CBDC is likely to require Pacific island country regulators to redirect scarce resources away from pressing challenges, such as enforcing anti-money laundering and counterterrorism financing regulations, while maintaining correspondent relationships with overseas commercial banks.

For this reason, this brief concludes that now is not the time for countries in the region to issue a CBDC, but it is the time to begin to develop the expertise and understanding. Understanding such matters requires focused study and substantial time for reflection and working through all potential consequences. If well-designed and appropriately implemented, CBDCs likely offer the best solution to the financial inclusion and remittance problems that bedevil the Pacific region. Now is the time to begin laying the groundwork for this potentially game-changing innovation by building knowledge within the region’s central banks.

LAUREN YU-HSIN LIN, City University of Hong Kong (CityU) - School of Law, City University of Hong Kong (CityU) - Centre for Chinese & Comparative Law
Email: yuhsin.lin@gmail.com
CURTIS J. MILHAUPT, Stanford Law School, European Corporate Governance Institute
Email: milhaupt@law.stanford.edu

Chinese state capitalism is transitioning toward a panoptic, technology-assisted variant that we call “surveillance state capitalism.” The mechanism driving the emergence of this variant is China’s corporate social credit system (CSCS) – a big data project to evaluate the “trustworthiness” of all business entities registered in the country. The CSCS is linked to a system of corporate rewards and punishments, representing a futuristic strategy of automated screening to determine which enterprises are allowed market access and benefits. In this paper, we explore the conceptual and operational linkages of the CSCS to three contemporary phenomena in the global political economy: the surveillance state, surveillance capitalism, and state capitalism, and their assemblage in China into a big-data-driven corporate behavior modification program in service of the party-state.

We provide the first empirical analysis of the CSCS scoring system, based on its recent rollout in Zhejiang Province, one of the first to implement the CSCS at the local level. A key finding is that while the CSCS is a facially neutral means of measuring legal compliance, politically connected firms (regardless of their status as state-owned or private enterprises, or the extent of state equity ownership) receive higher overall scores in Zhejiang. The channel for this result is a “social responsibility” category that valorizes awards from the government and contributions to Chinese Communist Party (CCP)-sanctioned causes. We find no significant evidence that better-governed firms or more profitable firms receive higher overall scores, although highly leveraged firms, subject to higher default risks, are associated with lower total scores. These results underscore the potential of the CSCS to nudge corporate fealty to government and CCP policy, raising the specter of high-tech central planning at the dawn of Chinese surveillance state capitalism. While our findings, based on the first available scores from a single province, have clear limitations, they provide an early window into the design characteristics, operation, and potentially far-reaching implications of the CSCS for the country as a whole.

BRIAN HANEY, Independent
Email: brian.s.haney44@gmail.com

This Essay makes three contributions to the blockchain and law literature. First, this Essay explores technical security aspects evolving with various governance mechanisms across blockchain networks. Next, this Essay analyzes digital assets under U.S. securities laws and executive enforcement policies, in light of several new developments at the U.S. Securities Exchange Commission. Third, this Essay crystalizes cryptocurrency compliance toward an autonomous governance system, introducing a new algorithm for compliance automation.

CHRISTOS MAKRIDIS, Stanford University
Email: cmakridi@stanford.edu

While data breaches have become more common, there is little evidence that companies that incur them experience a persistent decline in financial performance or security prices. Using new firm-level data between 2002 and 2018, this paper finds that firms experience a 26-29% increase in intangible capital following an average data breach. However, the largest and most salient breaches are associated with a 5-9% decline in intangible capital following a data breach. These effects are concentrated among firms in consumer-facing industries: smaller (larger) data breaches are associated with more positive (negative) effects on intangible capital. These results suggest that current regulatory guidance may not provide complete incentives for firms to invest in cybersecurity capabilities, particularly for small to medium size breaches.

ANTIGONI ALEXANDROPOULOU, European University Cyprus
Email: antigonialex@hotmail.com
MARTIN WINNER, Vienna University of Economics and Business - Department of Business Law
Email: martin.winner@wu.ac.at

The CJEU’s I.G.I. decision deals with an important aspect of creditor protection in divisions. The Court holds that the actio pauliana under Italian law may be applied to divisions, notwithstanding that such a protective measure is not foreseen in art. 146 and 153 Directive 2017/1132/EU. We argue that the Directive’s ex post protective measures should be understood as fully harmonizing provisions. The decision fails to strike the right balance between the interests of all relevant stakeholders involved, especially between different groups of creditors and that it unduly impairs legal certainty. However, if one takes the decision as a basis, the judgment gives Member States considerable room to introduce or maintain additional safeguards in their national legal systems. We show that national legislators should not give in to this temptation, neither for domestic nor for cross-border divisions.

ROBERT T. MILLER, University of Iowa College of Law, Classical Liberal Institute, New York University Law School
Email: robert-t-miller@uiowa.edu

This short piece responds to an article by Professor McLeod and argues that, even under strong natural law assumptions about the natural rights of human beings to form associations, there is no reason to think that corporations, churches or other associations of individuals are real persons in any ontological or metaphysical sense. Anything we want to say about the rights and obligations of associations under the natural law is fully explainable in terms of the rights and obligations of the individual human beings who compose such associations.

KUZI CHARAMBA, University of Hong Kong
Email: charamba@hku.hk
DOUGLAS W. ARNER, The University of Hong Kong - Faculty of Law, University of Hong Kong
Email: douglas.arner@hku.hk
ARTEM SERGEEV, The University of Hong Kong - Faculty of Law
Email: sergeev@connect.hku.hk

Digital finance platforms - "BigFintechs" (BFTs) - have significant impacts, both positive and negative, on the path towards achieving the United Nations Sustainable Development Goals (SDGs). At present, however, there is no systematic or holistic international governance framework that manages potential negative impacts or effectively encourages positive impacts. As such, this Technical Paper of the UN Taskforce on Global Digital Finance Governance provides an overview of the ways in which a select set of SDGs are reflected in international governance and their potential lessons and implications for the governance of BFTs. The paper begins by discussing the international human rights system — a well-established ‘hard law’ framework — as it touches on almost the full range of the SDGs. From this, we turn to several other SDGs where there has been significant focus and where well-developed international approaches have emerged. In particular, we consider the international frameworks addressing, in turn: decent work and economic growth (SDG 8); gender equality (SDG 5); climate change (SDGs 12, 13, 14 and 15); and peace, justice and strong institutions (SDG 16).

We begin with the international human rights law (IHRL) framework because of its unique complementarity to the SDGs. Analysis shows that more than 90 per cent of the SDG targets are intrinsically linked to specific provisions of international and regional human rights instruments and labour standards. However, while IHRL is typically associated with state-based actors, we discuss the important shift that is currently taking place as IHRL broadens its applicability to private actors as well, thus including BFTs. The growing movement and imminent applicability of mandatory corporate human rights due diligence is a significant shift for which many companies are unprepared, and few understand. At present, most companies do not appreciate the true nature and extent of their human rights impacts. We discuss some of the implications that transplanting or subsuming notions of state obligation may have on current notions of corporate (social) responsibility and what this could mean for BFT corporate strategy in relation SDG impacts.

On the matter of decent work and economic growth (SDG 8), we discuss recent developments and issues of concern that are both internal and external to BFT operations. As BFTs hail from a wide expanse of sectors such as e-commerce, social media and ride hailing services, the challenges to labor and their working conditions are equally as complex and varied. Internally, pertinent labor issues can include the hazardous nature of workplace environments, such as warehouses and call centers; the contestation over the right to be considered a ‘worker’ rather than an independent contractor (in the ‘gig economy’), and the ensuing labor protections that are associated with the former; and the application of artificial intelligence (AI) to supervise labor in sometimes discriminatory ways. To highlight, we discuss the UK Supreme Court’s recent decision on Uber’s driver policies and the labor union decision at Amazon. With regards to external challenges, we discuss the issues of modern slavery and supply chain due diligence, and how they arise in the context of BFTs. In all cases, we highlight the need for BFTs and regulators to strike a balance between protecting vulnerable workers while developing appropriate governance frameworks that can fulfil the tremendous potential of platform-based business models.

Our coverage of climate change (SDGs 12, 13, 14 and 15) complements Technical Paper 3.1. Whereas Technical Paper 3.1 presented some of the initiatives being pursued by prominent regulators, such as the European Commission, in this paper we broaden that scope to consider governance initiatives by the private sector as well. We situate BFTs within the sustainable finance context as either financiers or issuers and present relevant frameworks such as the Equator Principles (EPs) and the United Nations Principles for Responsible Investment (PRI). In so doing, we highlight how we are currently in a relatively nascent stage in the development of international governance ‘green’ and sustainable capital markets. This development will require considerable effort and alignment of purpose and initiative across both the public and private sectors.

Finally, we provide an overview of governance initiatives pertaining to SDG 16 (peace, justice and strong institutions). The primary international governance frameworks in this domain are those for anti-money-laundering (AML), countering the financing of terrorism (CFT) and anti-corruption/anti-bribery.

This discussion of how a range of existing approaches and their relationship to the SDGs are reflected in the international governance of BFTs demonstrates the significant impact that BFTs have in our drive towards achieving the SDGs. However, the discussion equally highlights that much work is still required if we are to effectively manage that impact. Given the potential of BFTs’ platform-based model to offer catalytic opportunities for economic development, particularly in developing countries, it is important for policymakers and regulators to develop appropriate governance frameworks that are infused with the right principles and values.