October 23, 20184min478

Hong Kong Stock Exchange Proposes Framework for Regulating Cryptocurrency

The Hong Kong Stock Exchange (HKEX) believes that legal frameworks around finance and cryptos should be the same.

The world’s sixth largest stock exchange in its research paper looks at the need for regulators to keep up with the pace of financial technologies. And if they lag behind, the existing laws of finance should be applicable to the companies in the FinTech space, based on their resemblance with the traditional services. 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 difference in Fintech regulations among countries,” HKEX added, “the principle of consistency generally applies, i.e. financial services with the same nature are subject to the same regulations under the existing legal framework, so as to maintain fair competition, ensure regulatory effectiveness and prevent regulatory arbitrage.”

Supervisory Sandbox

Crypto innovations can improve a system as much as it can hurt it. The HKEX paper takes instances from other countries and their blockchain testing labs. Known as “supervisory sandbox testing,” the process aims to minimize risks by deploying blockchain and crypto innovation among a privately-governed network of users with minimal adaption requirements and regulatory restrictions. A full-scale deployment ensues only after the crypto product passes on the serviceability, the security, and the regulatory front.

Noting that supervisory sandbox practices are only limited to the banking sectors in its current format, the HKEX report recommends that these testing models should be extended to non-banking sectors such as blockchain and cryptos as well. Excerpts:

“Given that Fintech Supervisory Sandbox (FSS) is timely and flexible in making a regulatory response to market innovations, it can encourage Fintech innovations and minimize the negative impact of regulatory uncertainties with effective risk prevention and control. It is, therefore, the most suitable regulatory tool for Fintech.”

RegTech: When Regulators Innovate Their Own Practices

The HKEX research paper proposes that Hong Kong regulators establish an effective regulatory technology (RegTech) system by incorporating more use cases of AI and big data. The system would include a better, face recognition-enabled KYC process, sentiment monitoring, and identifying corporate relationships.

In the context of crypto and blockchain startups, a working RegTech system would allow them to approach legalities and auditing faster than usual. They would be able to put their business papers, including “registration information, annual reports, notices/announcements and information on its shareholders/legal persons and connected companies,” online to seek approvals in a timely fashion.

“There are now some business search engines (e.g. “Handshakes”) in the market which can help regulators analyze the nexus of commercial transactions and relationships in the financial market,” the HKEX paper added.

“These business search engines can analyze public information of listed issuers faster and in greater depth with the help of technologies, providing the accurate connections between companies and discovering possible insider dealing. This would be the primary application of big data in RegTech.


About us

We are the new economy news hub. 2100NEWS is the professional index, data, and tools provider in the digital asset space, offering Crypto Market Intelligence, providing the perspective you can trust and equipping you with information edge you need to stay ahead. (Real-time data of token issuers and news, analysis and commentary from community.) We are very excited to contribute to the evolution of the industry and build an ecosystem around our offering (the institutional-grade data infrastructure required to enable institutional investments in digital assets). We want our contributions (Contents and Tools on 2100NEWS.com) to be useful for helping investors.


CONTACT US

CALL US ANYTIME



Latest posts



Newsletter


    • ethereumEthereum (ETH) $ 3,548.45 0.8%
    • litecoinLitecoin (LTC) $ 103.11 8.76%