Yu Weiwen: Balance the innovation and risk of financial technology through interactive and evolving regulatory approaches.

On December 17th, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, led a delegation from the Hong Kong Banking Association to visit Beijing and had discussions with the media on topics such as the internationalization of the RMB, financial technology, new types of fraud, and green finance. In response to a question from reporters about how to balance innovation and risks in the financial technology sector and promote the healthy development of financial technology in Hong Kong, Eddie Yue stated that the Hong Kong Monetary Authority adopts an interactive and evolving regulatory approach to assist banks in striking a proper balance between the benefits and risks of applying new technologies, and has introduced various measures, such as the Financial Technology Regulatory Sandbox. In addition, Eddie Yue emphasized the need to pay special attention to fraud issues caused by generative artificial intelligence. Eddie Yue stated that over the past year, Hong Kong's financial system has been very stable, particularly the banking system, with a current capital adequacy ratio of around 21% and a liquidity coverage ratio of about 180%, both of which exceed international regulatory standards. Furthermore, under the linked exchange rate system, Hong Kong's currency market operates smoothly. Hong Kong's stock market also welcomes more high-quality Mainland Chinese companies to list in Hong Kong. He pointed out that the Hong Kong Monetary Authority provides a favorable regulatory environment to promote digital finance and financial technology development, adopting a "risk-based" regulatory principle, and formulating corresponding regulatory requirements based on the risks derived from relevant financial activities or technological applications, providing principle-based guidance. Eddie Yue further explained that in order to assist banks in striking a proper balance between the benefits and risks of applying new technologies, the Hong Kong Monetary Authority adopts an interactive and iterative regulatory approach, introducing various measures such as the Financial Technology Regulatory Sandbox. Eddie Yue also emphasized the need for regulatory inclusiveness, particularly in terms of financial innovation for small and medium-sized banks. Eddie Yue believes that the four key areas related to artificial intelligence applications (operational risks, fraud, customer protection, and impact on the economy) are closely monitored by international regulatory agencies, and the banking industry should pay special attention, especially in the area of fraud. At the meeting mentioned above, Eddie Yue expressed concern that deepfake technology may be misused to spread false rumors and provoke public panic, especially during periods of market tension and weak public confidence. As generative artificial intelligence capabilities continue to improve, all stakeholders in the financial system urgently need to work together to discover and combat the misuse of generative artificial intelligence. It is equally important to raise public awareness and vigilance through education.