According to a recent research report, the Chief China Economist’s Office and Innovation Lab of Hong Kong Stock Exchange is looking at the potential of the blockchain technology and Artificial Intelligence (AI) within the areas of finance, for example, providing an overview of blockchain technology and possible use cases in equity markets, trading, and settlement. The report says:
“Emerging technologies such as blockchain could be integrated into the areas of investment, trading, clearing, and settlement.”
The report also says that the regulations should be common for all companies in the world of finance.
“The principle of consistency requires that … the issuance of digital currencies and digital funds must be governed under the existing securities regulatory framework,”
The report suggests that we must follow the principle of consistency in financial regulations. Different jurisdictions can apply different rules to the technology in different use cases. But the same nature of businesses must have the same rules like financial businesses of the same nature must have same regulation for all companies whether they are traditional companies, fintech, or blockchain or crypto related companies.
“The public fund-raising activities of shares issuance by issuers — which do so with merely a prospectus published on the internet but without any underwriter nor compliance with the IPO registration procedures or strict disclosure requirements — must be rectified by subjecting them to the governance by the Securities Law.”
The fast-changing nature of fintech industry has the potential to take advantage of regulatory loopholes, so it becomes necessary to continuously update the existing regulations at the pace of technological changes.
According to the report, bringing similar financial services under the existing regulatory framework will help in maintaining fair competition; prevent regulatory arbitrage, and regulatory effectiveness.
In March 2018, the Hong Kong Stock Exchange reportedly talked to its antipodean counterpart, the Australian Securities Exchange (ASX) to learn the experience of ASX in shifting over to a blockchain based settlement system.