Fintech developments

Chinese wall comes down on developments in fintech

The Australian Securities and Investments Commission (ASIC) recently entered into an agreement with the China Securities Regulatory Commission (CSRC) to enable the regulators to share information and keep abreast of developments in the financial services space and their respective regulatory responses.

The agreement extends to the development of regulatory technology (regtech), providing access to the results of regtech trials which, generally, have the goal of improving regulatory efficiency not only for the regulators themselves but also for businesses in meeting their compliance obligations.

ASIC and Chinese regulatory authorities have recently taken a different approach to the rise of cryptocurrencies and initial coin offerings (ICOs), with China recently banning ICOs outright due to the increased risk of fraud as the technology and markets develop and consumer understanding of the inherent risks begins to grow. Conversely, ASIC has taken a contextualised approach to ICOs, providing that the regulatory regime surrounding an ICO will be dependent on its circumstances, such as whether it involves a managed investment scheme, offer of shares, or a non-cash payment facility. It is unlikely either country’s approach to ICOs will change as a result of this agreement, however a key focus will be on consumer-facing developments, such as the rapid rise of digital payment solutions for which Chinese transactions made up half of the global volume last year.

Information sharing in this context, tying into ASIC’s existing arrangements with Hong Kong, Japan, the UK, UAE and others, should continue to provide ASIC with a depth of information across a variety of jurisdictions to enhance its regulatory response to emerging financial products and markets.

ASIC Chairman Greg Medcraft has said that ‘understanding new developments and their impact in overseas markets helps us to remain proactive and forward-looking in our domestic approach.’ Similarly, understanding how different jurisdictions balance encouraging innovation in the fintech sector whilst ensuring their consumer protection regimes are robust enough to encompass a constantly evolving marketplace will ultimately help boost confidence in these emerging areas.

With investment in Chinese fintech companies alone estimated at AU$13 billion last year, it is hoped that this enhanced relationship between ASIC and CSRC will help lead to greater consistency in the regulation of fintech products across Asia and facilitate their expansion into the mainstream.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.