Comment: Regulatory sandbox and blockchain coexist and help innovation

Source of this article: "Financial World" magazine; original title "Regulatory Sandbox and Blockchain Associated "

Author: Guo Xinghua (The author is chief economist in through community block chain)


Recently, the Beijing Municipal Bureau of Local Financial Supervision stated that it was the first in the country to launch a fintech innovation supervision pilot and explore the construction of a prudent and inclusive Chinese version of the “regulation sandbox”. The central bank supports this. Regulatory sandboxes and blockchains have once again become the focus of heated discussions. The vitality of technology lies in continuously trying to break the original barriers, liberate productivity, and build new business logic, but this may form a confrontation with the existing regulatory system. . In the past ten years of development, regular companies are unable to continue to invest in research and development in the face of policy risks. The core technical team of the blockchain has turned to gray areas around the world to avoid supervision and create hidden risks. The supervision sandbox provides a soft piece of sandy land, where the innovative subject can crawl around without worrying about injury; the supervising subject can observe the footprints on the sandy ground and can easily heal the potholes left by failure.

The term "blockchain" is derived from the style of the underlying data structure of the Bitcoin system. It is now used to refer to technologies and systems that can operate data without the authorization and endorsement of a trust center. Blockchain technology is not a single information technology, but an open system distributed ledger that is jointly maintained by a series of related technologies and theories. His core feature is the reliable flow of data without trust. From a technical point of view, blockchain technology is committed to creating a "strong security mechanism under an open architecture", which ensures the overall security and stability of the system through game mechanisms and consensus algorithms.

The brutal growth of the blockchain industry has spawned a regulatory sandbox. According to the 2015 summary of the Financial Conduct Authority (FCA) in the UK, it can be seen that, first of all, the focus of research and development by some fintech companies is to avoid supervision. These technologies are not artificial intelligence, big data, the Internet of Things and cloud computing, but blocks. Chain technology. Second, formal financial institutions are afraid of competition and are unwilling to open up data interfaces and business scenarios. Instead, they build technical barriers and prevent new technologies from entering the mainstream market. Third, regulators are very new to new technology, and they don't know how to regulate it. From the beginning, the regulatory sandbox was actually a learning mechanism, not a regulatory mechanism. Its most important purpose was to encourage innovation under the national regulatory system. Specifically, there are three aspects. First, let traditional financial companies participate in the new blockchain technology and evaluate the benefits of these technologies. Second, let the blockchain technology return to the right direction and no longer evade supervision. Technology, use technology to regulate technology.

Under the supervision of sandbox 1.0 mode, the government is in a dominant position in the sandbox. It formulates the processes and technical standards of the sandbox business, and needs to give evaluation opinions on the test items. As technology continues to iterate, converge and innovate, and business logic expands, the regulatory sandbox continues to face increasing challenges. First, the knowledge base and talent pool are updated in a timely manner, and the processes and systems need to be continuously iterated. In the face of controversial projects, the sandbox can accurately determine whether it has technological innovation and can perform efficient screening. Neither eliminated technology can be included, nor can new technology trends be shut out. Second, to avoid the subjectivity of evaluation, it is necessary to introduce transparent, scientific, systematic, and objective testing and evaluation tools. Whether fintech innovation can bring benefits to customers and the market is a business prejudgment, and to a certain extent subjective. Third, establish a complete and traceable project database to ensure the accuracy of sandbox test results. Sandbox evaluation has high commercial value. The government needs to correctly guide market expectations and self-certify innocence to avoid benefit transmission.

Blockchain technology assists the supervision sandbox upgrade with version 2.0. Supervision sandbox 2.0 distinguishes the functions of sandboxes into system supervision and technology supervision. The process of supervision sandbox 1.0 is used to exercise the function of system supervision. Industry sandboxes are used for testing and evaluation, and objective evaluation criteria are given. In the regulatory sandbox 2.0, the government is responsible for two things, formulating regulatory policies and issuing evaluation reports. The authorized industrial sandbox system, according to its own complete ecology, scientifically and objectively obtains test results, and the report comes as a result. The evaluation process is well documented. The part of industrial sandbox technology supervision has a huge workload, which is almost equal to that of a leading enterprise operating an industry. Supervisory sandbox 2.0 is likely to give part of the industrial sandbox to specialized sandbox companies and foundations to operate. The government is still directly involved in the supervision of the sandbox. In fact, the detail standard should be an association or a sandbox organization. Given.

In the supervision sandbox 2.0 stage, due to the entry of the industry sandbox, the relationship between supervision and enterprises will be closer. How to avoid the transmission of benefits has become a difficult problem. By using the blockchain technology, the test report is released on the chain, which can ensure that the government, the industry sandbox operator and the test company, and even more participants receive the test report at the same time. Under this situation, it is impossible to cheat. Furthermore, you can use the blockchain technology to transform the supervision sandbox. The role of the supervision node is set up at the bottom and supervision is performed at key nodes. If problems are found, the characteristics of the blockchain technology can be used to trace back step by step. Promote KYC compliance and anti-three measures (anti-money laundering, anti-terrorism and anti-tax evasion). In addition, for particularly important governance principles, rules can be written into the bottom layer of the blockchain and smart contracts, and at the consensus level, the relevant data for mandatory disclosure to government regulatory nodes is also an important exploration for regulatory technology (RegTech).