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Clifford Chance

Clifford Chance
Fintech in 2023: Five trends to watch<br />

Fintech in 2023: Five trends to watch

Our experts predict what's next for key areas including DLT, AI and the metaverse

Last year was a tough one for fintech with the collapse of a number of high-profile industry players, as well as wider economic pressures including the war in Ukraine, supply chain challenges and high inflation.

Following the bold predictions we made last year, we highlight five key trends for fintech in 2023.

Simon Crown, co-head of our global fintech practice, says...

"Our conclusions on fintech trends for 2023 recognise the significant headwinds faced by the sector, but seek to identify what will persist and grow: it is increasingly clear that there are transformative use cases in financial services for DLT. It is also clear that legislators and regulators are constructing new frameworks within which such developments will take place."

Paul Landless, co-head of our global fintech practice, adds...

"2023 will see the fintech market consolidating, with convergence  between differing digital asset players, payments providers and finance and capital markets platforms, particularly in the trade finance space. Adoption and scale will be paramount as we'll see survival of only the fittest firms who can keep pace with the scale of regulatory change."

Explore our five trends below.

What's ahead for 2023?

1. DLT is coming of age

2022 was arguably the most difficult year for crypto to date, with the failure of major industry players and significant price volatility. This highlighted the necessity of new crypto regulations being developed globally, with regulators under pressure to ensure that new frameworks, such as the EU's Markets in Crypto-Assets Regulation (MiCA), are sufficiently robust to ensure early warning systems are in place and to prevent widescale industry contagion.  

What's next?

For market players, we will see a move from "Bitcoin to blockchain" – away from volatile products in favour of focusing on increasingly sophisticated distributed ledger technology (DLT) financial markets infrastructure projects. There will be much greater due diligence into counterparties and potential acquisition targets – see our crypto resources for market participants in times of distress or get in touch for our crypto distress issues list.

Regulatory expectations for managing operational and other risks arising from uses of DLT are maturing and regulators will increasingly require market players to operate with more stringent risk controls. Expect more co-ordinated global action following the Financial Stability Board's October 2022 consultation on regulation and supervision of crypto. Jurisdictions which have limited their focus to stablecoins (including the UK and Japan) will be rushing to expand their frameworks. Regulators will be considering the intersection of cryptoasset services regulation with insolvency and restructuring frameworks and, whether specific regulation is needed to facilitate restructurings or orderly wind-downs of centralised exchanges in particular, e.g., with ring-fencing or resolution planning requirements similar to those for banks.

Partner Steve Gatti says...

"While there are prominent voices within the US executive and legislative branches calling for the implementation of a robust, durable framework for the regulation of crypto markets and their service providers, the most meaningful action to date has been through high profile regulatory and criminal enforcement settlements, leaving market participants without certainty.

It is possible that the recent high-profile bankruptcies will spur Congress to act on proposed legislation that has had bipartisan support, but it is hard to be optimistic given competing priorities and the overall political climate in Washington."              

2. Sustainable digital finance

Sustainable digital finance describes the intersection of the use of technology in finance with environmental, social and governance (ESG) objectives. Fintech solutions can provide value in terms of social inclusion and practical implementation of environmental ambitions. However, fintech products also raise a number of challenges around sustainability including the carbon footprint of technologies and the cultural and ethical issues raised by developing products using personal data or AI.

What's next?

We expect to see a tech-powered reignition of the voluntary carbon credit market, given the continued regulatory focus on exaggerated claims around reductions in carbon impact. DLT will be used to help develop a transparent and verifiable carbon market by monitoring commitments to these projects against standards, as well as facilitating tokenisation to broaden access to the credits for a wider pool of investors. The BIS Innovation Hub and Hong Kong Monetary Authority are already working with financial institutions on Project Genesis, a green finance project using DLT to facilitate the tracking of carbon credits for climate-related bonds in real time.

Partner Lena Ng says...

"Fintech and sustainable digital financial initiatives will continue to evolve in 2023, as regulators continue to develop their policy thinking, and increasingly collaborate and coordinate on these issues."

What's next?

From March 2023, we'll see the first projects launched under the EU Pilot Regime. It will allow operators of financial market infrastructures, such as trading venues and securities settlement systems, to experiment with DLT in issuance, trading and post-trade processes within a sandbox environment that will last for three years. Global regulators and the wider market will be watching and we might see similar initiatives offered in APAC and the Middle East. El Salvador is taking a step further with its new digital assets issuance law, establishing a legal framework that will facilitate its proposed issuance of a Bitcoin-backed "Volcano Bond" that it plans to use to repay sovereign debt and build "Bitcoin City".


The market will move towards enhanced legal certainty. UNIDROIT is currently consulting on a set of draft principles for digital assets and private law which aim to improve the clarity around conflict of laws issues, among other things. In the UK, we will see the outcome of two consultations, with a Legal Statement on the Issuance and Transfer of Digital Securities due from the UK Jurisdiction Taskforce, and the UK Law Commission due to report on digital assets to offer greater clarity.

Senior Counsel Marian Scheele says...

"2023 will be a year of decision making by fintechs about which regulatory regime fits best with the products and services they offer, now and in the future. The development of new regulations like MiCA and the DLT pilot regime in the EU alongside existing financial services frameworks expands the possibilities for market participants, however, collaboration with existing licensed entities may still be the most effective option for some firms."

4. Evolving risk for financial AI

The use of AI and machine learning technologies is governed by a growing patchwork of overlapping legislative and regulatory initiatives, from data privacy, consumer protection and cybersecurity to new and developing AI-specific regulations, many of which have extraterritorial effect. This makes using AI lawfully increasingly challenging for businesses. Financial institutions must also consider the additional overlay of relevant financial regulation.

What's next?

The EU's AI Act will be a game-changer in terms of how AI will be regulated in the EU and beyond, introducing a risk-based framework for governance of the entire AI supply chain, with extra-territorial reach and significant sanctions. The EU's AI Liability Directive is being negotiated in parallel to introduce harmonising measures on civil liability and compensation for damage caused by AI. Important concepts under both, including how tightly AI is defined, remain to be confirmed through negotiations. Similar far-reaching AI legislation will follow from other global regulators, so close monitoring is required.


Financial regulators will focus on systems and controls and how well financial institutions are managing the practical implications of AI use. Crucial topics to consider include AI systems' fitness for purpose, accurate marketing, testing and accuracy. Firms should focus on consumer impact to avoid censure.


Even ahead of new legislation coming in, financial and data regulators globally are increasing enforcement action to demonstrate the cost of not complying with existing law and regulation. Reputational concerns are becoming increasingly important in the face of growing enforcement activity. There will also be an increased antitrust enforcement focus on businesses using AI and data and we will see more AI dispute cases heard in local courts, which are critical to build out the limited existing body of case law.

For more, watch our international expert panel discussion Managing AI in an evolving legal landscape.

Partner Kate Scott says...

"Data class actions are here to stay. Claimants, their legal representatives and funders are refocussing on higher value individual claims, e.g. those involving biometric data, testing the procedural mechanisms as they do so."

5. Financial services in the metaverse

Although the metaverse continues to attract lots of attention, sceptical voices are growing louder. For example, much of the poor share performance of Meta has been attributed to the significant investment the group is making in metaverse development. However, we anticipate that creativity and commercial growth by a range of metaverse developers will continue in 2023.

What's next?

In 2023, legislators and regulators will continue to play catch-up with the metaverse, making the first steps towards specific laws and regulations. The EU Commission has already identified an "initiative on virtual worlds " as a 2023 priority. Attempts to regulate the metaverse might follow the existing patchwork of international tech regulation with a focus on regulation of the online environment and specific rules for large service providers, with a finance-specific overlay for financial institutions.


We will start to see the first specific metaverse-related arbitrations and court cases considering legal issues, e.g., which forum will have jurisdiction over virtual disputes, where are taxes due, and how general laws will be interpreted in relation to the technical characteristics of the metaverse.


Financial services providers will continue to explore the commercial potential of the metaverse, with focus expanding to the possibilities of the first successful financial services being B2B (business to business) rather than B2C (business to consumer). We'll see some high-profile metaverse projects from financial institutions and investment firms, including tokenisations, further launches of metaverse investment funds, and acquisitions of or joint ventures with emerging metaverse-focused fintech firms.

For more, read our briefing The Metaverse: risks and opportunities for businesses.

Counsel Alexander Tollast says...

"2022 marked a significant step forward for the digital capital markets, with the EIB's innovative digital bond issuance closing in November and regulatory initiatives taking shape. It is certain that momentum will continue to build in 2023, as the EU Pilot Regime is launched in March and we get closer to legal certainty in key jurisdictions. The potential for the use of DLT in the issuance, trading and settlement of debt securities is clear and we look forward to seeing continued evolution of the industry this year."

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