A senior official from the People’s Bank of China (PBOC) has penned an essay on the priorities of Chinese authorities when it comes to regulation of fintech in China.
In an essay entitled “Exploration and Implementation of Fintech Innovation Regulatory Tools in China” (我国金融科技创新监管工具探索与实践) published on 15 April, PBOC deputy-governor Fan Yifei (范一飞) writes that the central bank has “created new innovation regulatory tools, which need to effectively handle the relationship between security and innovation.”
According to Fan key considerations and priorities when it comes to regulation of fintech in China include:
- Abandoning a simple “one sword slice” model and strengthening regulatory accommodation. According to Fan this will involve “new soft regulatory methods…trial-and-terror mechanisms for innovation that are highly flexible, and strengthening information exchanges and positive interactions between regulatory authorities, innovators and the public.”
- Introducing “pluralised linked” public supervisory mechanisms, raising the effectiveness of regulation. “New innovation regulatory tools incorporate public supervisory mechanisms and make full use of different social entities, enabling financial consumers to deeply understand the functional nature of innovative products, as well s potential risk and compensation measures…the media plays the role of a ‘radar’ for society, and exercises supervision of the safety, compliance and legality of innovative products.”
- Establishing “firm thresholds” for innovation applications, emphasising prudential regulation. “Fintech development cannot walk the old path of internet finance, and must emphasise both soft regulation as well as prudential regulation. Tech-driven financial innovation is to a definite extent an exploration of the unknown, facing uncertain factors, risks and variables.”
Fan points out that since 2019 PBOC has worked with central government authorities including the National Development and Reform Commission (NDRC) and the Ministry of Industry and information Technology (MIIT) to launch fintech application trials in a total of ten provinces and municipalities, including Beijing, Shanghai, Zhejiang and Guangdong.
In December 2019 PBOC also launched a new “fintech innovation regulatory tool” in Beijing, consisting of a fintech sandbox for which an initial batch of six applicants have already obtained approval.
Fan said that Chinese authorities were also in the process of accelerating the establishment of a fintech regulatory framework based on innovation regulatory tools.