“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.