Security challenges
Jiang also pointed out that regulators will face challenges in investor protection, market fairness and financial stability, stemming from fast-expanding fintech, which is particularly relevant in China as the country is strengthening control against financial risks.
The vice chairman said fintech had blurred the boundaries of regions, industries and markets. At the same time, the skyrocketing increase in transaction volume and faster transaction speed could spread risks and make them more destructive.
In September, authorities ordered a ban on Initial Coin Offerings, a controversial digital coin fundraising scheme, and shut down all virtual currency exchanges in the country, as the rapidly expanding market, attracting both innovators and scammers, spawned concerns over financial risks.
Chinese regulators have also specified new rules to clean up rampant peer-to-peer lending and an insecure cash loan market, which dealt a heavy blow to the stock prices of China's micro lenders in recent months.
"We cannot drop fintech for its security risks, nor can we ignore the security risks because technologies have brought so much convenience to the financial industry," said Hou Yunchun, former deputy director of Development Research Center under the State Council.
Regulatory balancing
Facing the same regulatory issues, financial authorities across the globe have come up with many innovative solutions, of which regulatory "sandboxes" or "firewalls" are among the most popular methods.
For regulators, regulatory "sandboxes" allow them to test financial innovation in a controlled environment before they mature, so that new technologies and products can evolve without causing threats to the existing system.
"Similar to 'regulatory sandboxes,' in China, we have pilot projects for innovative products and technologies," said Fu Jianfeng, an associate researcher with the Ministry of Science and Technology, who now works with the local financial bureau in Chengdu, a western Chinese city.
He cited the pilot financial reform zone in the eastern city of Wenzhou, established in 2012 to try innovative financial services and regulatory practices.
To keep abreast with the latest developments and protect market order, the People's Bank of China (PBOC), China's central bank, set up a fintech committee to enhance research, planning and coordination in this field.
The PBOC has also moved to address practical situations. In the latest move, it ordered payment institutions to obtain proper permits to offer payment services based on barcodes, and said cross-bank barcoded-involved transactions must be channeled through the central bank clearing system or other legal clearing houses.
The central bank said it has always been aware of the delicate balance between encouraging innovation and controlling risks, and the new standards on barcode payment reflect that principle.
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