Hong Kong: Asia’s FinTech Hub
Perhaps best known to most of us as the technology that allows us to use our smartphones for mobile banking, financial technology (“FinTech”) is ‘a new financial industry that applies technology to improve financial activities.’[1] With global FinTech investment reaching $22.3 billion in 2015[2], it is one of the most rapidly growing industries of the Information Age.
Hong Kong’s regulatory regime has recently been criticised for being too conservative, leading entrepreneurs to shop around for other regimes that are more pro-active in encouraging innovation and development. In-keeping with its desire to be Asia’s FinTech hub, 2017 has seen the signing of a number of co-operation agreements between Hong Kong’s Securities and Futures Commission (“the SFC”) and its global counterparts. One such global counterpart is the United Kingdom’s Financial Conduct Authority, responsible for regulating a jurisdiction currently regarded as one of the most ‘FinTech-friendly’ in the world. For those involved in the FinTech industry, these agreements will be regarded as an encouraging sign.
Whilst not legally binding, the co-operation agreements aim to facilitate mutual assistance between the SFC and other regulators across the globe, and illustrate a clear intention to foster a culture of innovation and unlock new business opportunities that might otherwise have been missed.
Scope of Assistance[3]
The co-operation agreements seek to provide a framework for co-operation through the following three aspects:
- Referral Mechanism
The Authorities will refer to each other Innovator Businesses that would like to operate in the other Authority’s jurisdiction. The Receiving Authority intends to assist the Innovator Businesses in understanding the regulatory regime under the Receiving Authority’s remit, and how such regimes may be relevant to them.
- Information Sharing
The Authorities intend to share information about innovations in financial services in their respective markets, where appropriate. This may include, but is not limited to:
Emerging trends and developments;
Regulatory issues pertaining to innovation in financial services; and
Information on organisations or bodies which lead efforts to promote innovation in financial services.
- Potential joint innovation projects.
Authorities intend to consider participating in joint innovation projects on the application of novel financial technologies.
Global Counterparts
To date, the SFC has signed co-operation agreements with the United Kingdom Financial Conduct Authority (May 2017), the Australian Securities & Investments Commission (June 2017), the Dubai Financial Services Authority (August 2017) and the Securities Commission Malaysia (September 2017).
Other developments
The signing of these agreements follows on from earlier activity on the part of Honk Kong’s regulators to encourage the growth of the FinTech market. In March 2016, the SFC established a “Fintech Contact Point” to ‘facilitate the Fintech community’s understanding of the current regulatory regime, and to enable the SFC to stay abreast of the development of Fintech in Hong Kong.’[4] Following suit, the Hong Kong Monetary Authority has established a “FinTech Facilitation Office.” Amongst other things, this new office acts as “a platform for exchanging ideas of innovative fintech initiatives among key stakeholders and conducting outreaching activities.”[5]
With the ever-growing desire of financial institutions to operate as global business, Hong Kong’s regulatory bodies have taken a number of steps to solidify their position as Asia’s go-to regime for FinTech innovators and entrepreneurs alike.
A full list of the co-operation agreements and their content can be found here
Brendan Kelly QC
Laura Paisley
[1] http://www.open-jim.org/article/view/322/221
[2] https://www.accenture.com/t20161011T031409Z__w__/us-en/_acnmedia/PDF-15/Accenture-Fintech-Evolving-Landscape.pdf
[3] https://www.fca.org.uk/publication/mou/fca-ia-co-operation-agreement.pdf see para 5
[4] http://www.sfc.hk/web/EN/sfc-fintech-contact-point/
[5] http://www.hkma.gov.hk/eng/key-functions/international-financial-centre/fintech-facilitation-office-ffo.shtml
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