The Hong Kong Exchange & Clearing, or HKEX, wants existing regulations to be applied to blockchain firms, according to a report published on October 19.
The comprehensive report discussed various practical applications (and the limits) of blockchain technology in finance, more specifically in securities trading and settlement.
The HKEX believed how applying securities laws and principles to blockchain and cryptocurrency sector would help ensure regulatory consistency and prevent arbitrage.
The report also discusses the use of artificial intelligence in such areas as robo-advisory and how such novel technologies are transforming finance, especially when it came to asset management.
As the report said:
“The consistency principle means that financial businesses of the same nature should be subject to the same regulation. Financial services, be they offered in a virtual or real environment, should be governed by the same legal framework. This will ensure fair competition and prevent regulatory arbitrage.”
Hong Kong’s bourse also recommends that the regulatory framework should also be continuously upgraded given the shapeshifting nature of new technologies and to avoid any regulatory gaps.
The HKEX, which is reportedly experimenting with its own blockchain application in partnership with Australian Exchange, or ASX, also recommends the use of artificial intelligence, machine learning and Big Data in market supervision.
The report also discusses at length the so-called regulatory sandboxes rolled out in various jurisdictions for financial technology startups and recommends the scope of these companies to be expanded to include firms from various sectors and sub-sectors to finance.
So far, the majority of the participants in the so-called sandboxes have been from the banking industry. HKEX consistently ranks, along with New York and London bourses, to be amongst the world’s top three exchanges.