China's version of high-difficulty regulatory sandbox! Beijing Financial Bureau Director: The list to be announced next week will definitely include blockchain financial applications

The 15th Beijing Municipal People's Congress has convened for the third session on the 12th. Beijing is taking the lead in piloting the regulatory sandbox for financial technology (referred to as "regulatory sandbox"). Huo Xuewen, director of the Beijing Local Financial Supervision and Administration Bureau, stated that the first batch of selected projects will be announced next week. Financial applications using blockchain technology are also considered a must-have project.

In late 2018, the People's Bank of China began planning a financial technology regulatory sandbox, deciding to launch financial technology application pilots in ten provinces and cities including Beijing, Shanghai, and Fujian. Many of these projects involve advanced technologies such as distributed databases and artificial intelligence, aiming to promote the integration of finance with emerging technologies, connectivity between finance and livelihood services, facilitate data resource integration, and strengthen regulation. Beijing, which is the first sandbox pilot, will also announce its first batch of projects next week.

The remarks by Huo Xuewen demonstrate China's emphasis on blockchain technology:

Any technology applied in the financial field can be included in sandbox testing, and blockchain technology will definitely be included in the "regulatory sandbox" testing.

However, inclusion criteria are not just related to "blockchain." Huo Xuewen stated that the focus of testing is not only on the technology itself but also on testing the role of project services in the real economy, such as to what extent they can serve small and micro (meaning vulnerable) entities, enhance financial risk management, and provide financial value to more people.

"Regulatory sandbox" is not accessible to ordinary people

The "four requirements," as explained by Huo Xuewen, regarding China's financial technology regulatory sandbox are:

First, the qualification of "a licensed financial institution holding a financial license from two regulatory authorities." What are the "two regulatory authorities"? One is the People's Bank of China, and the other is the China Banking and Insurance Regulatory Commission or the China Securities Regulatory Commission.

Second, licensed financial institutions can independently apply, or jointly apply with financial technology or large technology companies.

Third, adhere to the principle of risk bottom line.

Fourth, in case of investor losses, the testing institution must compensate. Prior agreements on risk prevention must be made to test compliance and risk control levels, to balance the development of financial technology and financial risk prevention.

Cryptocurrency exchanges will not be licensed in the future

According to reports, the head of the Beijing Financial Supervision Administration stated that licenses related to cryptocurrency exchanges are unlikely to be issued in the future. Huo Xuewen, the director of the Beijing Local Financial Supervision and Administration Bureau, told the media that there is "zero tolerance" for issuing tokens, and virtual currencies cannot serve as legal digital currencies. Issuing, selling, and trading virtual currencies within China is illegal.

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