Hong Kong Stock Exchange proposes framework for regulating cryptocurrency trading
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Answer Hong Kong Stock Exchange proposes framework for regulating cryptocurrency trading
The Hong Kong Stock Exchange (HKEX) believes that the legal frameworks around finance and digital currencies should be the same.
In its scientific research, the sixth largest stock market in the world examines the need for regulators to keep pace with the pace of financial technologies. And if they are delayed, current financing laws should be applicable to companies in the fintech space, based on their similarities to traditional services. For example, blockchain can be introduced within the realm of investment, trading, clearing and settlement. Likewise, the issuance of digital assets on the blockchain could be subject to an existing regulatory framework for securities.
The Hong Kong Stock Exchange added:Read:The decline in the volume of Bitcoin trading in centralized exchanges and its growth in its decentralized counterpart
“Despite the difference in fintech regulations between countries, the principle of consistency applies in general—that is, financial services of the same nature are subject to the same regulations under the current legal framework, in order to maintain fair competition, ensure effective regulation and prevent regulatory arbitrage. ”
Cryptographic innovations can improve the system as much as they can harm it. The paper from the Hong Kong Stock Exchange takes on instances from other countries and blockchain trial labs. This process known as “box management testing” aims to reduce risk by spreading blockchain and crypto-currency innovation among a network of privately governed users, with minimal adaptation requirements and regulatory restrictions. It only becomes fully publicized after the encryption product has passed service, security, and regulatory authority.
Noting that supervisory sandboxing practices are limited only to banking sectors in their current form, the Hong Kong Stock Exchange report recommends expanding the test models to include non-banking sectors such as blockchain and cryptocurrencies as well. Here are excerpts from their paper:
“Given that fintech supervisory protection is timely and flexible in creating a regulatory response to market innovations, fintech-driven innovations can be encouraged and the negative impact of systemic uncertainty can be reduced while effectively preventing risks. Thus, it is the most suitable regulatory tool for financial technology.”Read:Only 4% of altcoins outperformed Bitcoin compared to last year
RegTech Regulatory Technology: When Regulators Create Their Own Practices
The research paper from the exchange suggests that Hong Kong regulators are creating an efficient RegTech (RegTech) system by incorporating more AI and big data use cases. The system will include a ‘know your customer’ process that enables better recognition of faces, monitoring of emotions, and identification of inter-company relationships.
In the context of crypto and blockchain startups, a practical RegTech system will allow them to handle legal aspects and audits faster than usual. They will be able to put their working papers, including “registration information, annual reports, notices/announcements, information about its shareholders/legal persons and associated companies”, online for timely approvals.Read:Bitcoin soars nearly $24,000 as US inflation slows to 8.5%
“There are now some commercial search engines (eg “handshakes”) in the market that can help regulators analyze the business relationship and relationships in the financial market.”
“These commercial search engines can analyze public information on listed issuers faster and in greater depth with the help of technologies, providing accurate communications between companies and discovering potential insider dealing. This will be the primary implementation of Big Data under RegTech.
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