TABF Financial Review: Combining Blockchain Development With Financial Supervision

Cryptocurrency prices have been plummeting, and financial authorities in a number of countries have ordered improvement in anti-money laundering measures, implying security worries. Issues related to self-regulation and supervision have received particular attention. Regarding blockchain application areas and regulation, Brad Garlinghouse, CEO of the U.S. digital payments company Ripple, recently said that “the blockchain revolution is taking place inside the system, rather than outside. It is better to integrate the existing blockchain system with regulators than to destroy it.” The advantages of blockchain are gradually shifting from “single point verification concept” to “commercial operation development stage” Authentication, payment and transfer functions have fully-developed applications (IBM and SecureKey provide identity verification solutions, while Ripple and the Bank of Japan offer real-time transfer apps), which will move the blockchain towards consumption, and development of relevant APIs and more useful services.

We suggest the following facts of financial regulatory supervision be considered: 1) Understanding the applications and industry composition of new technologies, and establishing appropriate regulatory policies; 2) Based on risk management, avoiding impeding early-stage intervention or process innovation; 3) Maintaining neutrality between equivalent technologies, to guard against regulatory arbitrage; 4) The eventual use of experimental regulation to predict risks and provide an opportunity to test and verify innovative concepts. Taking these business development and regulatory criteria into account will promote the continued development of FinTech, make regulation more objective, and create new success cases for the blockchain ecosystem, as well as creating more FinTech businesses and opportunities for cooperation with the finance sector.