The Chinese securities market needs new rules focused on blockchain in order to ward off potential risks, according to a new paper from the China Banking Regulatory Commission (CBRC).
The paper, published on 1st June authored by CBRC staff members Liu Yuheng and Zhou Shaqi, suggested that Chinese regulators try to learn from its counterparts in the US and the UK as they look to develop new blockchain rules. While a footnote specified that the opinions in the paper do not represent the agency’s official position, it nonetheless offers a window into its current line of thinking.
The agency – which functions under China’s State Council – detailed several areas in which blockchain can help streamline the China securities market, including initial public offerings (IPOs), security deposit and transaction, and overall savings cost. At the same time, the authors highlighted what they believe are serious challenges given the tech’s nascent stages of development.
The report said:
“The innovation of blockchain application in the security market still needs to follow the theory and rule of thumb of the finance sector. The previous chaos of P2P lending in China explained well how a fast-developing technology can outpace the financial regulation and bring serious threat to the system.”
The paper proposed establishing a “negative list” approach at the early state of policymaking in order to clarify potentially problematic areas and to avoid the scenario where the innovation could outwit the regulation again.
In addition, by referring to opinions from its counterpart in the US, the commission said in the report that the central government should take lead in building up a blockchain industry standard instead of letting companies and organizations independently do so.
Citing recent moves from major central banks in the world, including the Bank of England joining the Hyperledger project and the Hong Kong Monetary Authority participating in distributed ledger consortium R3, the authors also advocated for cross-border and industry collaboration.
The report’s authors also called for the creation of a so-called “regulatory sandbox”, in which startups and companies can develop and test new financial products in a limited setting.
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