Sat. Jul 11th, 2020

Planet Compliance

Innovation & Regulation in Finance

FinTech’s Gutenberg Dilemma or the Problem of Conflicting Regulations

8 min read

One of the biggest problems for FinTech startups as well as establish firms is regulation. Unlike traditional financial institutions who already struggle to some extend with the larger number of regulations they have to comply with, FinTechs also often lack the resources and experience in dealing with this very important aspect in their daily life. If that wasn’t challenging enough, FinTechs are hit even harder where regulations across different jurisdictions conflict.

The Magic of Books

I don’t know about you but you probably are an avid reader, too. I’ve always loved reading and to say it with Stephen King, “Books are a uniquely portable magic.” I love the weight and feel of a book, but I admit that there is a case to be made for eBook readers, too. Wherever you go, you can take a thousand (or more) books with you. I love libraries and bookshops, but with an eBook reader you can start reading a new book.

There are dozens of book shops that sell eBook versions of paperback and hardback titles and, of course, there are free alternatives like real-life libraries, too. The most famous resource of free eBooks is probably Project Gutenberg. The oldest digital library was founded in 1971 and for the largest part is a collection of the full texts of books in the public domain, i.e. texts where no exclusive intellectual property rights apply, because they have expired, been forfeited, expressly waived, or may be inapplicable. To that end, its administrators carefully verify the status of its ebooks according to United States copyright law and material is added to the Project Gutenberg archive only after it has received a copyright clearance, and records of these clearances are saved for future reference.

I’m a big fan of Project Gutenberg because it makes wonderful (or lesser so) books accessible around the globe 24/7 for free. Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity (not my words, but those of Martin Luther King Jr.) and spreading free books is a great weapon against this.


Big Trouble in Little Italy

Anyway, recently Project Gutenberg found itself in a bit of a pickle, or actually, the people living in Italy that would like to access the digital library. On May 24, Italy’s financial police, the Guardia di Finanza blocked the website in the country with DNS filter. Unless you use a VPN that blurs your actual location or rather that of your IP address, the website won’t load and thousands of texts are unavailable to you.

Apparently, the Public Prosecutor’s Office of the Court of Rome decided to place Project Gutenberg on a list of websites that “for profit (consisting of the transfer of personal data for the purpose of advertising), distributed, transmitted and disseminated in pdf format, magazines, newspapers and books (assets protected by copyright), after having illegally acquired the computer files with the related content […] “:


There are, of course, many arguments in the overall discussion about copyright and you could be tempted to say that if you need to read a book whose copyright has expired, you will certainly find a version on Amazon for a little fee, so why don’t you just pay up? To which, one might respond by pointing out that you’re not paying the author of the work who deserves to be rewarded (even if it is a bad book, at least in most cases), but a multinational that makes the profit by using public domain content.

If you look up the original request issued by the Guardia di Finanza sent to legal support at Google Ireland, you will find that Project Gutenberg is listed among 37 other websites that mostly distribute editorial products for free and most illegally. This is in turn stems from illegal filesharing activity promoted through Telegram. the cloud-based instant messaging and voice over IP service. Most contributors to the discussion point out that Project Gutenberg is entirely different from the other mentioned websites and as such should not have been listed among these.

The Italian Library Association AIB (Associazione italiana biblioteche) made a vigorous appeal requesting immediate restoration of access to the Project Gutenberg portal:


The AIB Censorship Observatory considers it extremely serious and worrying that, by order of seizure of the Public Prosecutor of Rome in the context of an investigation into digital piracy, the Guardia di Finanza has blocked access from Italy to the Project Gutenberg freely accessible and non-profit portal that since 1971 has been collecting reproductions of books in the public domain, not subject to copyright.

As everyone knows, Project Gutenberg promotes the widest dissemination and knowledge of the registered cultural memory. For years it has been hosted by large universities that made their servers available, before becoming an autonomous organization, one of the main of this type and inspiring model for many other similar ones (such as the Manutius Project in Italy), mainly supported by work. of many volunteers.

We reiterate that it is one of the most qualified projects on the net, with a large amount of documents accessible for free in compliance with the US Copyright Act, because it is in the USA that it is based: they are works in the public domain, out of rights because they have always been public domain (such as the Bible) or because the maximum copyright terms have passed.

Seeing the Gutenberg Project linked to a whole series of domains that contain pirated editorial materials for commercial purposes causes bewilderment and disapproval in the world of libraries.

A summary investigation may give rise to such a serious decision as that of blocking access to the portal without even consulting the managing director of the project to ensure a minimum of contradictory on the disputed facts and possibly give way to the managers to remove any content erroneously loaded? Indeed, it seems that the CEO of Project Gutenberg only learned a posteriori that the site had been made inaccessible by Italy by the Guardia di Finanza.

The reason for the blocking order, reported on this page access-project-gutenberg/) is then surreal: Project Gutenberg ended up in the list sites to ban because, “in execution of the same criminal design” (sic!) Telegram (a messaging site that allows a user to post files and links to all his contacts) had ended up in private channels which, in addition to the links to Gutenberg, they also linked to many pirate sites!

In Italy, before proceeding with the demolition of an abusive construction in the Valley of the Temples, it takes years and the observance of many procedural guarantees against the manager, while evidently there is no protection for the thousands of Italian citizens who see themselves today access to a meritorious and public benefit initiative such as the Gutenberg Project, considered among the main international expressions of the freedom of access to knowledge, which is a fundamental aspect of freedom of expression, has been forbidden.

Years ago, the AIB signaled ( that excesses of copyright protection and overzealous network guardians can affect the individual freedoms of users. What happened in the case of the Gutenberg Project is a case in which this risk has materialized.

The AIB Censorship Observatory therefore requests immediate restoration of access to the Project Gutenberg portal.


The AIB makes a lot of good points: the inclusion of Project Gutenberg among websites that distribute copyright protected with a commercial purpose, the lack of dialogue with Project Gutenberg or not considering partial blurring of disputed content rather than the outright block of the entire library and the apparent ignorance of the prosecutors regarding the purpose of Project Gutenberg.


FinTech Roadblocks

But all that is somewhat beside the point for the sake of the argument we’re trying to make here. You see, the AIB statement already points towards the key point, which appears to be a difference between US and Italian/EU copyright law. Without getting into the details, the European point of view is that the copyright expires 70 years after the death of an author, while American law regarding works published before 1978 enjoy copyright protection for 95 years after their initial publication. Doing the math, this can clearly result in a number of cases where some texts are covered in the US but not in Europe and now, we have finally arrived at the crucial point for the FinTech industry.

Transferring this dilemma to the situation of financial regulation, we find many similarities that potentially have far more severe consequences than the temporary blocking of free eBooks in Italy (though this is serious case, too, for other reasons though). Many FinTech firms are dependent on scaling their services to achieve a level of commercial scalability. In other words, a crowdfunding platform, for example, from France is limited to the French market because it cannot easily offer its services to customers from other countries due to the restrictions caused by conflicting laws across the European Union (and beyond). While the EU is working on a common solution, crowdfunding, so far, is regulated nationally, which has created distinct differences in regulatory obligations, meaning that equity crowdfunding campaigns often limited to a single jurisdiction, which significantly reduces market exposure and opportunity.

A similar situation applied for the treatment of Blockchain applications. At the height of the ICO boom every national regulator seemed to working on its own solution disregarding the cross border implications of the digital world we live in.

These are just two examples that highlight the risk FinTech firms operate in: bringing a solution to market, but being blocked by regulatory obstacles. This is not about qualified concerns about the legitimacy of a service or solution but the headaches colliding regulatory frameworks cause. If you have to apply up to 27 different solutions to comply with the rules of EU member states (and not considering markets outside it), you quickly end up with an impossible task. Naturally, large financial institutions have to deal with the same challenge. However, FinTech startups often find themselves in a race against time to get to a level of sustainability their traditional counterparts are not concerned about.

The example of the Project Gutenberg block is therefore not simply one of the misguided efforts of a national authority in the legitimate fight against online piracy and the protection of the hard work of authors (as well as the risk the Open Internet faces).

It’s also a case that underscores the importance of level regulatory playing fields for innovation and a better financial system.





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