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Sovereign Algorithms, Borderless Finance: Navigating Legal Pathways for EU-China Fintech AI Integration Amidst Data Localization Regimes

Publication date: 12.06.2026

Financial Law Review, 2026, Issue 41 (1)/2026, pp. 16-46

https://doi.org/10.4467/22996834FLR.26.002.23696

Authors

,
Klemens Katterbauer
EUCLID University
, Gambia
Euler-Franeker Memorial University
https://orcid.org/0000-0001-5513-4418 Orcid
Contact with author
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Laurent Cleenewerck
EUCLID University
, Gambia
https://orcid.org/0000-0002-9267-0428 Orcid
Contact with author
All publications →

Titles

Sovereign Algorithms, Borderless Finance: Navigating Legal Pathways for EU-China Fintech AI Integration Amidst Data Localization Regimes

Abstract

The convergence of financial technology (fintech) and artificial intelligence (AI) promises unprecedented efficiency in credit scoring, fraud detection, and algorithmic trading. However, the deployment of these technologies across the European Union (EU) and the People’s Republic of China (PRC) is increasingly obstructed by divergent data sovereignty regimes. This article examines the legal pathways available for EU fintechs utilizing China-trained AI models, and vice versa, within the context of conflicting data localization rules. By analyzing the General Data Protection Regulation (GDPR), the EU AI Act, China’s Personal Information Protection Law (PIPL), and the Data Security Law (DSL), this paper identifies the jurisdictional friction points regarding cross-border data transfers. It argues that while traditional transfer mechanisms (such as adequacy decisions) are politically unviable, technical-legal hybrids—specifically federated learning, model localization, and synthetic data generation—offer the only viable compliance architecture. The article concludes with recommendations for regulatory sandboxes and mutual recognition of technical standards to mitigate the risk of technological decoupling in the financial sector.

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Information

Information: Financial Law Review, 2026, Issue 41 (1)/2026, pp. 16-46

Article type: Original scientific article

Authors

https://orcid.org/0000-0001-5513-4418

Klemens Katterbauer
EUCLID University
, Gambia
Euler-Franeker Memorial University
https://orcid.org/0000-0001-5513-4418 Orcid
Contact with author
All publications →

EUCLID University
Gambia
ROR ID:

 Research Organization Registry icon 024596r45

Euler-Franeker Memorial University

Published at: 12.06.2026

Received at: 16.03.2026

Accepted at: 27.05.2026

Article status: Open

Licence: CC BY-NC-ND 4.0  licence icon

Percentage share of authors:

Klemens Katterbauer (Author) - 50%
Laurent Cleenewerck (Author) - 50%

Information about author:

Klemens Katterbauer is professor for International Law and Global Management at EUCLID University and EULER, specializing in Artificial Intelligence and its application to legal, business and energy as well as environmental applications. Author of more than five books and more than 80 reviewed articles in prestigious journals.

Laurent Cleenewerck is a professor of International Administration and Theology for EUCLID / Euclid Consortium and an ordained presbyter of the Ecumenical Patriarchate of Constantinople (2004) current serving as acting-rector at St. Innocent’s Orthodox parish in Eureka, California.

Classification number:

JEL Classification System:

International Institutional Arrangements (F55)

Article corrections:

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Publication languages:

English

Sovereign Algorithms, Borderless Finance: Navigating Legal Pathways for EU-China Fintech AI Integration Amidst Data Localization Regimes

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