- HKEX suggests that fintech firms be regulated under existing financial laws
- The fast-changing nature of fintech companies means regulations must be continuously updated as well
- Financial Action Task Force will draw up rules for international cryptocurrency regulation
Hong Kong Stock Exchange or HKEX, has recommended that fintech firms be regulated under existing financial laws. This includes fintech companies that focus on blockchain and cryptocurrencies.
Instead of creating new regulations, just integrate
According to a research report that was published on October 18, the Chief China Economist’s Office and Innovation Lab of HKEX are looking mainly at blockchain and AI’s potential within areas of finance. They released an overview and examples of blockchain and probable use cases in settlement, trading, as well as equities markets.
Based on the same report, they said that blockchain, along with other emerging technologies could be “integrated in the areas of investment, trading, clearing and settlement.” They also added that these rules should also be common to all companies so long as they are in the finance space.
Although various jurisdictions will still apply different rules to the technology in some of the use cases, the report’s authors still suggested the need to apply the “consistency principle” when it comes to the financial regulation. This means that “financial businesses of the same nature should be subject to the same regulation.” The authors also added that, “The principle of consistency requires that … the issuance of digital currencies and digital funds must be governed under the existing securities regulatory framework.” Moreover, they also mentioned that bringing the same financial services under the existing rules would “maintain fair competition, ensure regulatory effectiveness and prevent regulatory arbitrage.”
Rapid growth requires frequent updates to regulations
However, there was one potential issue that was raised. This is because the fast-changing nature of different fintech companies can also open up “loopholes” in regulation. Therefore, this means that the regulations have to be “continuously updated” in order to keep abreast with the pace of the technological change.
This report was delivered on the same day as that the Financial Action Task Force, the global money-laundering watchdog, has said that it will draw up rules by next June for international cryptocurrency regulation. The move would cover any other countries that wishes to stay included in the international finance system that would need to license as well as regulate wallet providers, exchanges, and even firms connected to initial coin offerings or ICO.
During the first quarter of this year, HKEX was also reportedly in discussions with the Australian Securities Exchange (ASX), its antipodean counterpart, to know more about its experiences in transfering over to a blockchain settlement system.