At the moment the most compact setup is with the laser emitter/receiver flat on  the user's wrist. I thought about making it as a ring instead of a wristband but the battery capacity would be tiny.

Seeing your prototype, it looks like your layout makes more sense than how I pictured it. With the sensor facing forward a user could be less obtrusive using it while walking, with arms naturally at the sides. 

So I'm just guessing, but would this be a laser TOF that emits a beam where the wearer points his or her hand? I'm picturing an emitter pointing toward the fingers.