In this episode we went on call with Chang Zi Qian, the CEO and co-founder of Intelllex, a legaltech startup that specializes in organizing legal and regulatory information using proprietary algorithms and platforms. Chang comes on call to talk about their recent launch of the legal knowledge platform called finreg.sg. So it’s a platform f2or anybody who wants to explore the regulations in Singapore when it comes to fintech, especially payments and crypto, as well as for fund managers who are looking to set up shop in Singapore and learn more about the regulations when it comes to fund management. We deep dive into the platform itself, the trends that influenced its creation, and how it can evolve in the next few years.
Highlights and Timestamps
- 00:16 Paulo introduces Chang Zi Qian;
- 01:56 Trends and tailwinds that led to the creation of finreg.sg; “We started to see a surge in a number of queries we received from the FinTech and blockchain companies, both startups and the financial institutions, including family offices.”
- 03:13 How finreg.sg builds upon Intelllex’s existing products for legal knowledge management; “At the core of it, understanding the knowledge within the space is actually about questions and answers. People [and] businesses ask questions to professionals, and professionals provide answers based on [their] knowledge.”
- 04:43 Use cases and user journey for finreg.sg; “In this day and age, people do not simply just throw their problems to a professional, because that doesn’t mean good cost savings. People will want to do a bit of education, a bit of self-reading before that.”
- 06:32 Chang’s thoughts on the evolution of Singapore’s fintech regulation; “I think that the government has adopted a “Let’s go create, and let’s not outright ban it” approach.”
- 08:10 The struggle to legally define new innovations and technologies; “…when businesses actually conduct searches [is that] they really want to find out what’s the definition of a few certain virtual assets, like stablecoins, NFTs. How does the government actually define [them]?”
- 09:55 Chang’s perspective on how legal definitions of virtual assets will arise; “The nature of virtual assets, cryptocurrencies, blockchain, whether or not that constitutes a security or whatever, the real definition, when the government or the regulators are forced to make a decision, will be when something goes to court.”
- 10:55 Chang’s thoughts on family office influx in Singapore and pressure for VC funds to go from early-stage to IPO; “…tax exemptions for the setting up of family offices directly contributed to a lot of the development of the space.”
- 12:45 finreg.sg as a targeted distribution platform for lawyers’ thought leadership; “It’s actually thought leadership. What [lawyers] write can be seen by the community that needs it, and has a demand for it.”
- 14:38 Future plans for finreg.sg; “So finreg.sg is not only about SG. It’s really about the various prominent capital markets.”
- 17:33 finreg.sg as a platform matching regtechs / KYC, AML fintechs with customers; “…because [regtechs] can write their opinion on the law and what their products actually do to help people overcome some of those regulatory hurdles, that’s where demand and supply matches as well.”
- 19:19 Rapid Fire Round;
About our guest
Chang Zi Qian is an entrepreneur with years of law experience. He previously worked in the Singapore Prime Minister’s office and law firm Rajah and Tann. From there, he saw a lot of pain points as a lawyer and decided to start his own legal tech startup Intelllex. He is also a member of the Singapore Committee for Future Economy. He was named twice as one of the 100 Leaders of Tomorrow at the St. Gallen’s Symposium, and once as the Dragon 100 Young Leaders in Hong Kong.
Paulo: I would like to welcome Chang to the show. Chang, how are you doing?
Chang: Hey, I’m doing great. Thanks Paulo for having me here today. A great job introducing what [my team and I] have been doing for the past three months.
Paulo: I’m sure it’s been a lot of work and we’ll get into that, but I also want to dial back three months back. When you started finreg.sg, what was the mindset behind starting this whole project? Why did you decide to zero in on FinTech regulation in particular fund management regulation in particular? Maybe you can talk a little bit more about any market tailwinds or larger trends that drove the creation of finreg.sg.
Chang: I think you hit the needle there on top when you say that there’s a trend because I think the reason how Intelllex got into financial services regulations is actually quite serendipitous. So in 2020, we were invited to work on a financial services regulation knowledge management product with [certain clients].
That was the first time we were introduced to the regulatory advisory and compliance space. After which, we started to see a surge in a number of queries we received from the FinTech and blockchain companies, both startups and the financial institutions, including family offices. They kept asking, “Do you have knowledge products in the financial regulatory domain? Do you provide a smart search for FinTech related law?”
So those were indications of an untapped opportunity. So we decided to apply our existing search and categorization technology on financial regulations to develop the platform a few months ago and we managed to launch it about two weeks ago.
“We started to see a surge in a number of queries we received from the FinTech and blockchain companies, both startups and the financial institutions, including family offices.”
Paulo: We will talk a little bit more about those trends later on, but I’m also curious to know how finreg.sg builds on your existing ecosystem of products around legal knowledge management.
Chang: So our hypothesis is as such. We think that in the regulatory FinTech or legal tech space where it involves reading regulatory or legal materials, it typically goes to the domain of the professional. Because number one, it requires [one] to read through a lot of content. Number two, people may not understand what’s the gist of the content.
That’s why we are centered upon developing knowledge within this space. Our existing products, Propositions and Stacks deal specifically with that. And at the core of it, understanding the knowledge within the space is actually about questions and answers. People [and] businesses ask questions to professionals, and professionals provide answers based on [their] knowledge.
So what we’re trying to do here is to encompass all these various elements that we have learned over the past four or five years to be able to extract useful content and knowledge for regulatory material, package it into a digestible form, and position it as a Q&A format for users. And we apply it in the financial regulation space. So eventually what users can do is to be able to get high-level answers very quickly and thereafter proceed to deep dive into their regulatory or legal problems with a professional thereafter.
“At the core of it, understanding the knowledge within the space is actually about questions and answers. People [and] businesses ask questions to professionals, and professionals provide answers based on [their] knowledge.”
Paulo: You talked about that whole Q&A approach, translating a lot of the legalese into something that’s readily digestible [and] readily searchable for anybody who goes on finreg.sg. So maybe you can talk about that whole process from a user standpoint, how they get from loading that platform to finding what they want, and then making some actionable plans from that. What can users expect from the platform?
Chang: So one of the gaps we identified when it comes to specifically financial services regulations is that users of the platform, which may be both businesses and professionals — professionals meaning lawyers, compliance consultants or tax people. There is a very distinct difference in that use case.
If you are a startup or you’re a manager of a family office, [where] you’re not legally trained, the way you look for information is going to be very different, really trying to ask a question and you may not be able to — or you may even want to digest the content. The questions you ask may not be technical, and because you have no understanding of the professional knowledge, you’ll be coming entirely from the business point of view [and] what is the business context.
In this day and age, people do not simply just throw their problems to a professional, because that doesn’t mean good cost savings. People will want to do a bit of education, a bit of self-reading before that. However, most of the platforms out there now cater to professionals, and individuals could only just randomly Google for stuff and hopefully they get something.
So from a user’s point of view, we’re trying to target that space, whereby people who are either starting a company or thinking of applying for a license or want to check a legal position before they go and meet a lawyer. [We’re] trying to accelerate that pace, for the user journey is really having a question, trying to find the answer, and eventually still looking for a professional because at the end of the day, businesses feel very safe with a professional, but they want to be educated, and to find things out.
“In this day and age, people do not simply just throw their problems to a professional, because that doesn’t mean good cost savings. People will want to do a bit of education, a bit of self-reading before that.”
Paulo: So to be clear, you’re not really replacing that type of relationship and that kind of role, it’s really bridging that gap between getting there and knowing exactly what you’re looking for when it comes to what you want to find out for regulation.
So I want to zoom out a little bit and talk about some of the trends that you’ve touched upon earlier in this conversation, and one of them is obviously there’s development recently, not just in Singapore, but all across the region, in terms of FinTech regulation. We see a lot of digital banking licenses coming out, Singapore especially working on a lot of crypto regulation as well. How would you say Singapore FinTech regulation has evolved over the past few years and how would you compare it to other markets in Southeast Asia and even other markets globally?
Chang: I think the numbers show by itself, that includes a lot more family offices and blockchain companies trying to relocate to Singapore and in the community, I would say that the regulators are doing something very correctly. I think I was particularly inspired by the MD of MAS Ravi Menon’s speech at the recent Singapore FinTech Festival.
I think that the government has adopted a “Let’s go create and let’s not outright ban it” approach. Although I have no insight into when regulations can change, the recent […] have expanded the definition of a virtual asset and virtual asset provider, an indication of it being wary of P2P may lead to regulatory change.
And I think it will be a good point to see how Singapore reacts to such new global trends and to see its attitude towards such new emerging technologies. From Ravi Menon’s speech, it is clear that Singapore is supportive of the whole infrastructure, the blockchain infrastructure in itself, and that position by itself actually already gives a lot of confidence.
“I think that the government has adopted a “Let’s go create, and let’s not outright ban it” approach.”
Paulo: Again, that’s the whole reason you guys set up this whole platform in the first place, because Singapore has been so open, when it comes to welcoming all these, fintechs as well as fund managers of family offices into the city state, and therefore they need this kind of service which you provide with finreg.sg.
But going back to FinTech regulation, given that it’s pretty much, I would say, a lot in the experimental phase, like there’s still a lot of creation happening, what do you think are still some of the biggest gaps when it comes to FinTech regulations a FinTech looking to set up shop here in Singapore?
Chang: What we understand when businesses actually conduct searches [is that] they really want to find out what’s the definition of a few certain virtual assets, like stablecoins, NFTs. How does the government actually define [them]? But unfortunately I think there is no clear definition now, as to say definitively, this is an NFT, this is a stable coin.
So people are still trying to match what they are trying to do, and fall within the understood parameters of a particular virtual asset. This is what is going to happen. Now, this is to be expected. It is to be expected for any new innovation that appears, because can you imagine a hundred years ago when the automobiles were introduced, where do you classify them? Are they considered cattle? Are they considered horses? Are they the same as stage coaches? What is it like?
The difficulty in trying to define and categorize new innovation is something that nimble economies like Singapore and innovative economies like Singapore will embrace. So I think what particular take away I got from the Singapore FinTech festival was what Ben Horowitz said. He mentioned it will be a mistake to try and classify new innovation in the old world order. People think that blockchain technology can replace their credit card, then they may be sorely mistaken because it’s not going to be a replacement for something in the old world order, but it’s a new entire financial system. And I think what finreg.sg is trying to do here is to partner the community and try to make the exploration process a clearer one.
“When businesses actually conduct searches [is that] they really want to find out what’s the definition of a few certain virtual assets, like stablecoins, NFTs. How does the government actually define [them]?”
Paulo: Just from your own perspective and having done all this work to put together this platform finreg.sg, through all the work that you and your team have done, how do you see the approach to defining these terms — is it more of a private [sector] driven approach, where the company tries out this innovation and the government just bases the definition on what whatever’s being done, or is it more coming from the government that they set these definitions eventually, and then the companies will follow.
Chang: I’ll be slightly technical here. In a sense, usually such definitions only arise when there’s litigation. So the nature of virtual assets, cryptocurrencies, blockchain, whether or not that constitutes a security or whatever, the real definition, when the government or the regulators are forced to make a decision, will be when something goes to court.
People argue it out, and a judge makes a determination of, “This is a security.” So it would be both ways I guess. Regulators can state something, but the private enterprises can [also] do something. And if there’s a dispute then it is put before the court to determine what is the real definition.
“The nature of virtual assets, cryptocurrencies, blockchain, whether or not that constitutes a security or whatever, the real definition, when the government or the regulators are forced to make a decision, will be when something goes to court.”
Paulo: So apart from helping fintechs, if you go on to finreg.sg, you’ll see three categories right away, crypto, payments, and then the third one is fund management. And you talked a little bit about a lot more family offices coming to Singapore. And we’ve also written about that in some articles on Insignia Business Review about a lot more Chinese families especially, coming to Singapore to be able to invest more actively in the region. From that angle, how has the regulation been like over the past few years? How has it evolved and how would you again, compare it to the rest of Southeast Asia and globally.
Chang: A lot has been reported that [these family offices] use the whole industry of external asset managers. And I think we have put in place schemes, under the IRAS Income Tax Act, for tax exemptions for the setting up of family offices directly contributed to a lot of the development of the space.
And of course in recent years, we got to see and hear the news [about] the Google founders, the Dyson family, setting up family offices here and you may see that in the fundraising space in Singapore, a lot more family offices are participating actively in early stage technology venture capital investments as well.
Paulo: And not even just being LPs anymore; they are actively directly investing into startups.
Chang: Yeah, and recently Sequoia Capital in the Bay Area changed their strategy for the 10 year fund because of the challenges brought about by family offices directly investing at an early stage because family offices are patient capital. This puts pressure.
Paulo: But do you think from the regulatory standpoint Singapore is ready for these kinds of funds perhaps?
Chang: It’s less to do with regulation than I think business needs. We actually see that already happening in China where, about four or five years ago, we had early-stage funds like ZhenFund move towards later stages, while Sequoia Capital China moves to earlier stages. And people are really trying to do it from the early stage to IPO. This is a global trend, which is business driven that’s happening in the [United] States now.
“…tax exemptions for the setting up of family offices directly contributed to a lot of the development of the space.”
Paulo: And speaking about, a lot more funds investing directly into startups, there’s obviously a lot more need for legal data as well to bridge this gap in knowledge. And obviously finreg.sg already takes that top of the funnel and you sort of lead them into those one-on-one conversations with lawyers. Do you see more lawyers taking on this venture funds startup related work as well?
Chang: Definitely. A lot more lawyers are actually taking up what we call emerging areas, such as crypto and of course the traditional fund managers. And I’m glad you mentioned the lawyers on the platform, because the lawyers actually form a very important part of the ecosystem that finreg.sg is trying to build, which is our content partners.
So apart from wanting to derive answers from the regulatory material, from the legislation, business users actually also want to see commentary from professionals and professionals also want themselves to be known to potential clients. So that is one of the things that is actually driving the site. And we’re actually seeing quite good stats from two weeks of launch of finreg.sg. So that’s actually specifically more than commentary, because they’re actually writing questions and answers.
Paulo: Yeah. I think that’s an interesting dynamic. I would say it’s not just unidirectional, people just coming onto the platform and the platform is sort of just like a static thing that people just search on, but they actually have on the other end lawyers, like fully content partners, all the content on the platform you do work closely with the lawyers there.
Chang: But this is very targeted. So people will know that whoever approaches them has read that content, and is actually interested in the particular question.
Paulo: So they also get feedback in that sense as well.
Chang: Definitely, because currently the alternative status or the status quo now is that lawyers will write a lot of content on their websites, but typically people will not go to a law website to research on what they want to know. So chances are, what they have written may not be found, but if you come to finreg.sg, that’s where people find questions and answers. Their content would be highly valuable.
Paulo: In a way it’s like thought leadership.
Chang: Absolutely. It’s actually thought leadership. What they write can be seen by the community that needs it, and has a demand for it.
Paulo: So essentially finreg.sg, from another perspective, you saw that need, that community with that need, and now you provide an opportunity for lawyers with that kind of legal expertise to be able to provide that content that this community needs. So maybe you can talk a little bit more about how exactly you work with lawyers on that side of the platform.
Chang: Working with lawyers is actually a bit more straightforward [than you might think]. Plus I was a lawyer and I think Intelllex has a reputation amongst the law firms, as well as a lot of our existing clients, they actually use our products like Propositions at Stacks. So when we approached them and told them, “We’re actually building up this financial services regulation space finreg.sg, I know we can hope to involve you as well to contribute content to it. Of course in return, we are able to direct some traffic your way.”
“It’s actually thought leadership. What [lawyers] write can be seen by the community that needs it, and has a demand for it.”
Paulo: It’s because you already had built up that network of lawyers from your previous products as well and speaking of finreg.sg right now, how do you see it evolving? Do you have any plans or evolutions of this platform or new features and services for the users here?
Chang: There are two main strategic directions that we are moving towards. The first one is that finreg.sg is only the start. We think that with the space, crypto and financial services evolving, it is not only a Singapore thing. Companies compare restrictions on where to put their money, where to set up their funds. People compare the regulations in Singapore, Cayman Islands…Hong Kong, Dubai, all the time. Startup companies do that as well. So we have [already] done our proprietary search algorithm…the second thing we are developing now is our proprietary questions taxonomy.
What would people ask? What are the related questions? And how are they organized? And apply that in another jurisdiction. And it would scale [as] we really figure it out. Singapore is a test bed. After we look at Singapore regulations, thereafter we can do Hong Kong very quickly, and then Cayman [Islands]. So when people ask one question, they actually know the legal position of let’s say, what is a stable coin? Singapore MAS says this, HK MAS says this…Cayman says this, really quickly. So that’s something we want to do. So finreg.sg is not only about SG. It’s really about the various prominent capital markets.
So that’s one, the second strategic direction that we are moving to is to integrate our existing products with finreg.sg, because, let’s say financial institutions or fintechs, or even family offices, they do have internal policies that they have drafted that’s in accordance with a particular regulation. So this in house knowledge is actually a product. It’s actually knowledge content that’s housed on Stacks, our online library for our clients.
We want to be able to plug in finreg.sg or finreg.hk or whatever with Stacks, so that users can be notified when there’s a change in regulation and they know which policies that you could change thereafter. So the two directions we are looking at.
Paulo: So definitely in terms of markets and that market comparison, which is extremely valuable, and also that interoperability with your existing product Stacks, which allows real time updates and real time communication between those platforms.
Chang: Absolutely. I think I really like the word interoperability.
“So finreg.sg is not only about SG. It’s really about the various prominent capital markets.”
Paulo: It’s all an ecosystem, and obviously finreg.sg didn’t just come out of the blue. it was built on top of, again, the network that you have of lawyers and then the content that you already have, and then the demand came in.
And before we head into our fire round one more question since we have a lot of founders listening in on the podcast and, one of the questions that especially early stage founders ask is, how to approach building up their legal capabilities and knowledge, and evolving that as the company matures. What are your thoughts on that, having worked with a lot of different founders and startups through your products and through the platforms that you’ve been building an Intelllex?
Chang: That’s a bit tricky because I think a lot of startups cannot afford to have in-house legal and a lot of their interactions with the law happens two ways. The first way is through fundraising. So they have their documents and employee agreements. The second part will be about regulations and more often than not those types of engagements are one-off. If you want to get a license, it’s a one-off [engagement]. So it’s a bit tricky to determine how they should be managing their internal knowledge.
But on a related note, our content partners do not only include lawyers. We also work with companies. So a lot of regtech and FinTech companies are born as a result of regulation, AML, and KYC. Then they know the regulations very well. So we also invite them to be content partners, to write content so that when demand for those products can be searchable on finreg.sg, because they can write their opinion on the law and what their products actually do to help people overcome some of those regulatory hurdles, that’s where demand and supply matches as well.
For various jurisdictions in Southeast Asia, if that can happen, that will be awesome because a lot of the tech companies now actually pay a listing to be somewhere, but that may not be the most effective because people only look for software when they face a problem and they fix the problem by having a question. So when a question and answer is written on finreg.sg that targets it very quickly. So this is something I want to throw out there.
“…because [regtechs] can write their opinion on the law and what their products actually do to help people overcome some of those regulatory hurdles, that’s where demand and supply matches as well.”
Rapid Fire Round
Top 3 Skills of a Startup CEO?
Chang: I think leadership is the most important item. The second is judgment. Number three is to distinguish what is relevant and what’s not relevant.
What is the biggest misconception people have about legaltech (startups)?
Chang: A lot of people think that legal and regulatory tech replaces the lawyer, but it actually doesn’t. People will still feel safer to have a lawyer to sign off.
Advice for founders raising their first round?
Chang: Something which I strongly believe in is to raise from investors that you can communicate with, that believes in you instead of just having the money. I think that’s the most important. The first round of capital, truth be told, founders go through big changes. We face challenges, so the support of the investor is the most important and the understanding. So that first round of capital I think should be people that you are comfortable with [and who] are aligned, that you trust.
Advice for founders seeking legal assistance?
Chang: From the founder’s point of view, don’t be intimidated by what law is telling you, but I think, at the end of the day, founders must be aware that business needs actually come first. So, legal advice ought to be in furtherance of business objectives, not changing business objectives to fit whatever the lawyer says. Having a lawyer that can appreciate understanding your business needs is something that I think is important.
What do you do to de-stress?
Chang: I walk and I hike quite a bit. So I hike at least once a week, and try to do 30 minute walks in the evenings.
Anything you would like to share?
Chang: I hope you guys can check out finreg.sg and I really hope to connect with you guys.