Hong Kong Stock Exchange Proposes Framework for Regulating Cryptocurrency
The Hong Kong Stock Exchange (HKEX) believes that legal frameworks about finance and cryptos must be the exact same.
The planet’s sixth biggest stock exchange in its study paper looks at the need to have for regulators to preserve up with the pace of monetary technologies. And if they lag behind, the current laws of finance need to be applicable to the firms in the FinTech space, based on their resemblance with the classic solutions. Blockchain, for instance, could be brought inside the space of investment, trading, clearing, and settlement. Similarly, issuing digital assets on blockchain could be governed by an existing securities regulatory framework.
“Despite the distinction in Fintech regulations among nations,” HKEX added, “the principle of consistency generally applies, i.e. financial services with the exact same nature are subject to the same regulations below the current legal framework, so as to maintain fair competitors, make certain regulatory effectiveness and prevent regulatory arbitrage.”
Crypto innovations can enhance a program as considerably as it can hurt it. The HKEX paper requires situations from other countries and their blockchain testing labs. Identified as “supervisory sandbox testing,” the procedure aims to lessen dangers by deploying blockchain and crypto innovation among a privately-governed network of users with minimal adaption needs and regulatory restrictions. A full-scale deployment ensues only following the crypto solution passes on the serviceability, the safety, and the regulatory front.
Noting that supervisory sandbox practices are only limited to the banking sectors in its existing format, the HKEX report recommends that these testing models must be extended to non-banking sectors such as blockchain and cryptos as nicely. Excerpts:
“Given that Fintech Supervisory Sandbox (FSS) is timely and versatile in making a regulatory response to marketplace innovations, it can encourage Fintech innovations and decrease the damaging impact of regulatory uncertainties with powerful risk prevention and handle. It is, for that reason, the most appropriate regulatory tool for Fintech.”
RegTech: When Regulators Innovate Their Personal Practices
The HKEX analysis paper proposes that Hong Kong regulators establish an effective regulatory technologies (RegTech) system by incorporating more use instances of AI and big information. The system would incorporate a greater, face recognition-enabled KYC procedure, sentiment monitoring, and identifying corporate relationships.
In the context of crypto and blockchain startups, a operating RegTech technique would enable them to method legalities and auditing faster than usual. They would be able to place their organization papers, including “registration info, annual reports, notices/announcements and data on its shareholders/legal persons and connected companies,” online to seek approvals in a timely fashion.
“There are now some company search engines (e.g. &ldquoHandshakes&rdquo) in the market which can support regulators analyze the nexus of commercial transactions and relationships in the economic marketplace,” the HKEX paper added.
“These enterprise search engines can analyze public data of listed issuers more quickly and in higher depth with the support of technologies, providing the precise connections amongst firms and discovering feasible insider dealing. This would be the primary application of big information in RegTech.
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Published at Tue, 23 Oct 2018 06:46:26 +0000