“Pioneers like Circle have already blazed the trail for single-currency coins.”
I arrive early in the morning at Luk Yu Teahouse on Stanley Street. It is a traditional favorite Hong Kong eatery, particularly among many of the city’s old-school tycoon families. I think it is accurate to call this place an icon among Hong Kong restaurants.
When you enter, it is like experiencing a time warp. Luk Yu opened in the 1930s. Its décor is marked by art-deco details, stained glass and classic artwork, and feels more like pre-Revolution Shanghai than anything in modern Hong Kong. Most of the waiters, in their traditional white jackets with big pockets, look as though they have been around just as long.
Benedicte Nolens, my guest, is buzzing with energy. She speaks fast, leaping from subject to subject. But first I want to know: why did you choose this restaurant?
“It’s one of the few places in Hong Kong where time has quite literally stood still,” she says. “Sometimes when you’re in the middle of so many hectic changes, it’s good to connect to the past.”
Although I agree, the stately venue doesn’t match Nolens’s personality. While both of them are charming, Nolens has been a force of nature in Hong Kong’s fintech ecosystem. She’s spent her career embracing “hectic change”, and hardly seems the type to want to slow down or indulge in nostalgia.
Nolens likes escaping from her comfort zone. She grew up in a cozy town of 6,000 people in Belgium, but left that for Chicago and New York to practice law. Then she showed up in Hong Kong shortly after the 1997 Hong Kong handover to mainland Chinese rule.
“I didn’t know it but I got a front-row seat for the Asian financial crisis,” she says (the crisis began in July 1997 with the devaluation of the Thai baht, and by the end of the year had turned into a hedge fund-led run on the Hong Kong dollar).
This being Hong Kong, it was inevitable that she went from securities law directly into finance, serving as the number-two compliance officer for Asia at Goldman Sachs and then the regional chief compliance officer at Credit Suisse.
It was, however, her next big job that got her, by accident, into fintech. She joined the Securities and Futures Commission as head of risk and strategy.
This was at a time when the SFC first had to grapple with the confusing dynamic of tech startups looking to disrupt and transform financial services. There was no obvious department in the SFC to deal with this. Naturally curious, Nolens volunteered to add this to her portfolio.
She became the informal fintech-facing regulator, a job that often meant interpreting these companies for the SFC’s executive directors as much as it meant helping startups navigate the regulatory process. Her role was formalized in 2016 when she was named the SFC’s first head of fintech.
She also served as part of the Hong Kong government’s steering committee on fintech (for the Financial Services and Treasury Board). So did I at the time, and that’s where we first met.
We have been talking so long, having dived right into the conversation, that we forgot to order breakfast. The waiter has long since wandered away, and getting his attention is a minor chore. Luk Yu is famous for its food, very traditional Cantonese, but is also known for service that caters to the establishment’s regulars but treats transient customers such as us rather indifferently.
Soon after we order, though, comes a marvelous procession of bamboo baskets whose lids, when lifted, reveal steamed beef balls and other hallmarks of Cantonese delicacies.
The capstone of Nolens’s time in government was her taking the lead in 2017 on a research report of financial technologies for IOSCO, the international association for global securities regulators. This represented an early example of Hong Kong authorities staking out a global leadership position.
“This paper helped convince global regulators that the unbundling of banks [by tech companies] was a phenomenon, and that new players were coming into finance with lots of different shapes and formats,” she says.
FACEBOOK’S GOING TO HAVE INTERESTING JOURNEY TRYING TO CONVINCE THE REGULATORSBenedicte Nolens
On the back of this work the SFC went on to quickly authorize more fintech companies, including robo-advisors and licensing crowdfunding platforms for authorized investors (the law here prohibits retail participation in crowdfunding), representing a new way for global startups to raise growth capital from Hong Kong institutions.
Throughout her time at the SFC, Nolens studied bitcoin and realized the technology was inevitably going to become something regulators would have to address.
This was a period when the crypto-currency side of the business was still looked upon by banks, securities companies and regulators as dodgy. The mantra was blockchain might be interesting but bitcoin was suspect.
Yet by 2017 the wave of initial coin offerings hit fever pitch, and regulators came to understand these were in many cases unregistered placements of securities. The U.S. SEC’s decision to apply its Howie test (effectively declaring all utility tokens to be securities) further demanded action.
By this point, however, Nolens wanted to be closer to the action. In 2018 she shocked her colleagues when she left SFC to join Circle, one of the leading firms in the crypto industry. She served as the firm’s chief compliance officer and played a role in its international government relations. It was only after her departure that the SFC got serious about crypto, in particular securities tokens.
What prompted the move? She responds by paraphrasing Gregory Gibbs, the CEO of the giant Shanghai-based Lufax. “If you want to be a challenger bank, you need to position yourself in a market of 100 million or more customers,” Nolens says.
To her mind, the crypto market has the global reach and lack of incumbents for a few firms to create businesses with that kind of scale. That was the opportunity, although for Nolens, the move to Circle was just as much about the chance to explore uncharted territory.
She has found the shift rewarding: “One year in crypto feels like you learn, experience and build as much as someone in traditional finance would in five years.”
A learning curve is one thing, but the industry remains very much a work in progress. It can be unstable. In June, she took a role as chief compliance officer at SC Ventures – still on the innovative cutting edge, but this time within the walls of Standard Chartered, a traditional bank.
She remains an advisor to Circle, however, as well as a board member of the Fintech Association of Hong Kong and an advisor to the London-based Global Digital Finance, an association trying to establish standards for digital finance. She also serves on the investment committee of AngelHub, the first startup investment platform in Hong Kong.
COMPLIANCE IS MORE INTERESTING THAN THE LAW; IT MOVES FASTERBenedicte Nolens
Before we know it, it’s 9 a.m. and time for both of us to hurry to our day jobs. She has to prepare for an upcoming trip to Osaka, where she’ll be sitting in on talks about the crypto industry on the sidelines of the next G20 meeting.
Before we leave, though, I ask this former regulator what she thinks of Facebook’s crypto-currency plans.
“Facebook’s going to have interesting journey trying to convince the regulators,” She says.
Will Facebook and its partners succeed?
“I think they will get there in some form or other, because pioneers like Circle have already blazed the trail for single-currency coins to receive regulatory blessing.”
It’s not that great a leap, at least from a securities point of view, to do the same for a stablecoin based on a basket of mainstream fiat currencies and cash instruments. But this is also an issue far bigger than just the SEC or other securities regulators. “Libra’s now the remit of central banks,” she says.
I’ve long thought about the prospects of China issuing a sovereign digital yuan to fund its Belt and Road Initiative. Could this be how things evolve, now that the People’s Bank of China has suggested Libra has prompted it to take another look at digital fiat?
“It could happen,” she says, both in response to Libra as well as in response to the broader trade war with the U.S. “China will continue to consolidate its position as the most important trading partner in Asia.”
I head to the counter to pay our bill. In keeping with Luk Yu’s traditional image, this is a cash- and credit-card establishment. I pay with cash, while wondering if our laws – designed for cash, cards, and analog securities – will be fit for purpose in the coming digital marketplace.
Nolens gets in one final thought. “Compliance is more interesting than law,” she says, heading for the exit. “It moves fast.” By the time I’ve received my change and step outside, she’s already out of sight.