Fintech’s regulatory challenges and dimensional construction -Part 5

Rule Governance—Principle Governance—Technology Governance

Throughout the history of the evolution of financial supervision laws, at first, detailed supervision rules were formulated for financial supervision. However, rule governance cannot effectively deal with new financial innovations that have not been included in the original supervision category. Therefore, financial supervision and laws need to design the principles of abstraction, generalization, and flexibility to govern. Technology governance can avoid the deficiencies of rule-based supervision and principled supervision. In the context of the rapid development of technology-driven financial innovation, if regulators still ignore the application of technology, they will not be able to effectively deal with the accumulated financial risks. Therefore, increasing the technological dimension of financial supervision is an inevitable trend of supervision. The application of technology has profoundly affected the law and governance. Adhering to the combination of technology governance and legal governance is an effective way to reshape financial supervision.

Prudential Supervision—Behavior Supervision—Technology Governance

New technologies have impacted the traditional financial market and caused major changes in the financial service industry. Traditional financial regulatory theories such as the Double Peak Theory have been unable to effectively respond to the changed financial market environment, triggering regulatory escaping and even bringing regulatory gaps. At the level of financial institution supervision, the traditional financial supervision model based on physical financial institutions has no time to deal with the new financial formats driven by technology. It must rely on scientific and technological means to achieve effective supervision. With the support of technologies such as artificial intelligence, big data, cloud computing, and blockchain, regulators can maximize the identification of funds and investors, diversify investment and other risk management, realize simultaneous innovation, and control of funds and assets. At the level of financial consumer protection, pre-regulatory measures such as high entry barriers are costly and inefficient. The emergence of new Fintech in this era is a fundamental measure to solve the opacity of regulatory information and will strongly improve the quality and efficiency of financial supervision.