Wu Xuchuan of the Central Bank: Blockchain can only weaken the center, and supervision has a pendulum effect

Wu Xuchuan, deputy director of the Internet Finance Research Center of the Financial Research Institute of the People's Bank of China

On November 5, Wu Xuchuan, deputy director and secretary-general of the Internet Finance Research Center of the Financial Research Bureau of the People's Bank of China, attended the "Second China Financial Development Summit" and expressed his views on the development and supervision of financial technology.

Wu Xuchuan believes that FinTech is the mainstream trend of the financial industry in the future. Specifically in China, FinTech mainly includes the Internet and mobile payments, online loans, smart financial management services and blockchain technology.

Main applications in the field of Internet and mobile payment

• Information security technologies, including biometrics, fingerprint, iris, face, image recognition, and tagging;

• Real-time payment and settlement protocols;

• Comprehensive payment services, such as e-wallets;

• Cross-border payment platform.

Online credit

• Improve the operational efficiency and service volume of traditional banks;

• disintermediation and virtualization of credit financing channels;

• Big data analysis for credit assessment.

Smart financial management services

• The use of artificial intelligence algorithms in investment decision-making;

• The application of big data and automation technology in information search and processing.

We have investigated Baidu Wuhan backend. We can capture and analyze any data, a certain time period, a certain keyword, including a certain change, and find that it is basically consistent with the objective facts or major influencing factors. People and machines communicate with each other. According to recent reports, using big data and artificial intelligence technology, you can still get quite rich returns by reasonably allocating them to 1,017 stocks. This is a recent research result. Cloud computing and big data analysis and management technology.

Blockchain Technology

Its main features are decentralization, disintermediation, distributed accounts, trustlessness, timestamps, encryption, and smart contracts. Regarding this feature, the market is very hot and controversial, probably around decentralization and disintermediation. What is the core? I personally think that it is still distributed accounts and smart contracts that are its growth. Many people regard decentralization and disintermediation as the core. I think there may be some problems. Although blockchain technology is a friendly technology, it may become an important financial infrastructure in the future. But to be completely decentralized and disintermediate, who will identify and regulate its risks, and who will protect the rights and interests of consumers? Who will prevent illegal acts such as money laundering crimes? The inventor of blockchain technology used this technology to do bad things.

Therefore, blockchain technology is good, but it cannot be completely decentralized. It can only downplay the center and weaken the center. Some people have proposed the concept of remote center, but most of it remains in the research stage. There are also a few relatively simple theories and companies doing pilot projects and scenario simulations, but the effectiveness is still controversial.

According to a research report by Citigroup, the cumulative investment attracted by FinTech in the past five years has reached US$49.7 billion, an increase of more than 10 times.

However, so far, there is no authoritative, unified and consistent definition of financial technology, but its main characteristics and content have a generally clear research scope. It is based on a series of technological innovations such as big data, cloud computing, artificial intelligence, and blockchain, and is fully applied to six major financial fields such as payment and clearing, lending and financing, wealth management, retail banking, insurance, and transaction settlement. Fintech is mainly driven by data and technology, and is changing the ecological landscape of the financial industry.

In March this year, the International Financial Stability Board also released a special report on FinTech for the first time. It also gave a definition based on its content characteristics: FinTech is financial innovation brought about by technology. It can create new business models, applications, processes and products, thereby having a significant impact on financial markets, financial institutions or the way financial services are provided.

Let's use data to illustrate this issue. Regarding its application, Citigroup has a report that the cumulative investment attracted by Fintech in the past five years has reached nearly 50 billion US dollars, an increase of more than 10 times, from 1.8 billion US dollars in 2010 to 19.1 billion US dollars in 2015. In the field of particularly fast growth, China is particularly prominent. According to the quarterly report "Pulse of the Fintech Industry" jointly published by KPMG and CB Insights this year, in the first quarter of 2016, Chinese fintech companies supported by venture capital attracted 2.4 billion US dollars in investment, accounting for half of the world's 4.9 billion US dollars. This is the development of fintech in the Chinese market.

On August 8 this year, the State Council issued the "13th Five-Year National Science and Technology Innovation Plan", which proposed to promote innovation in science and technology financial products and services. Science and technology finance is different from the financial technology we mentioned. Fintech, as we initially understood it, is a fusion, a simple fusion of technology + financial progress, not a combination.

Wu Xuchuan frankly stated that the future characteristics of the financial technology industry are first, de-bubble; second, rely on data and technology to transform the traditional financial industry; third, use technology to optimize product service forms, and the core value of the product is technology and service; finally, better serve the real economy and people's livelihood, and serve employment.

In the future, the industry will de-bubble. In a sense, P2P is also a peer-to-peer decentralized business model. To some extent, it is also an application of blockchain technology. In the past, blockchain technology lacked supervision and grew wildly. Now it is also in the process of de-intermediation. Blockchain technology is not as serious as P2P, but this technology has not been invented and applied more. Many people speculate on it, but there is no popular application in practice. The speculation can only speculate on this concept. It cannot rule out the suspicion of some virtual currencies and passing the parcel. Overall, it is still a good underlying technology.

Relying on data and technology to transform the traditional financial industry. At present, there are two major trends in financial technology: data and technology. With the help of these two drivers, intelligence, convenience and low cost have become the entry points for financial technology to transform traditional finance.

Optimize product and service forms with the help of technology. Products and services are still the core of financial technology, and the importance of technology and services will become more prominent. Only by keeping up with technology and services can you improve your customer loyalty and achieve sustainable development in the future.

No matter who financial technology is combined with, it must return to its essence and better serve the real economy and people's livelihood. This is the trend of the future and cannot be separated from the real economy.

At present, the performance of financial technology is in four areas that will develop rapidly in the future:

(1) Big data is used for credit reporting of individuals and small businesses. Big data and Internet credit reporting are areas that will develop very rapidly in the future.

(2) Regarding the application of blockchain technology in finance, there are currently many scenario simulations and pilot projects, but overall there is still some way to go.

(3) Technology insurance. If we combine sensors, satellite positioning and other technologies with insurance, we can apply agriculture, forestry and the entire ecological technology to the field of technology insurance. Personal insurance and property insurance can be accurately priced using technology big data, or even remotely priced. Artificial intelligence technology can be used for pricing. Through big data analysis, just input the pictures to me, and I can use artificial machines to determine damage, set prices and make compensation.

(4) The development of smart investment advisors. In the field of artificial intelligence, smart investment advisors are very important in the future. Some people say that the massive unemployment in the United States may not have much to do with the outside world, but may be caused by its robots, which account for 85% of the influencing factors. This is a report I saw today.

In recent years, many countries have adopted sandbox regulatory mechanisms for financial technology. For example, in May this year, the UK Financial Conduct Authority launched the "Regulatory Sandbox" project to encourage innovation in the UK financial services market.

Wu Xuchuan believes that regulation has a pendulum effect, that is, it is difficult to find a precise balance between stability and development. The government often swings back and forth between development and stability like a pendulum of a clock. When the economy is overheated, it may tend to emphasize stability and slow down the pace of development, but when the economy is not developing well, it emphasizes development again. Especially since the European and American financial crises in 2007 and 2008, the overall world economy has not yet recovered, and many governments have focused more on this aspect of development. Financial technology has developed particularly rapidly in recent years. Generally speaking, the government is relatively tolerant in this area. In the past few years after the crisis, the development of science and technology has been particularly rapid, especially with the development of China's Internet finance as a typical representative. This industry has developed very rapidly.

From the perspective of supervision, there are roughly three models for mainstream governments:

The model represented by the United States

Because the United States is a comprehensive management and comprehensive supervision, emphasizing functional supervision. The essential attribute of technology finance is still finance. You must do things according to a set of financial supervision theories. Even if the law is a little behind sometimes, the government will dynamically amend the law to keep up. In 2008, Obama introduced the "Job Startups Financing Act" (JOBS Act), which is how to develop after the financial crisis in the United States with a large number of unemployment, that is, to create more jobs and drive economic growth. And the thumb is constantly updated, especially the United States has made many regulations on equity crowdfunding, such as public and private equity more qualified investors, including large public and private equity. Therefore, the United States has strict supervision on financial technology.

Adaptive regulation represented by China

In a country like China, the market is developing too fast, and the business model is introduced too quickly. The legal supervision of the government and regulatory authorities cannot keep up. If they cannot keep up, they will be very passive, but they have to adapt to supervision. Therefore, some detailed rules, special governance documents or guiding opinions issued by the government often adopt a negative list model, stipulating that you cannot do bad things, but you can do other things. What is the positive list model? I stipulate that you can only do these things to be legal and compliant, so I adopt a negative list. In this regard, we can also clearly see that the government still emphasizes development in this regard and is relatively tolerant of this industry. Everyone cannot take advantage of the loopholes in government supervision.

Proactive regulation represented by Singapore and the UK

The markets in these countries are small and their technologies are not as advanced as those in China, so the government takes the lead in dominating and guiding the market.

In general, when developing financial technology, we must stick to our bottom line, seek balance between development and advancement, and seek balance between risk and regulation. We must firmly remember to put consumers' legitimate rights and interests at the top of our priorities. Only in this way can enterprises have vitality and develop better. (Comprehensive Sina Finance report)