Huang Yiping, official of the PBOC’s Monetary Policy Committee, suggests this Tuesday that it has become urgent for the Watchdog to subdivide digital financial sectors and impose corresponding regulations.

“Many countries have launched regulatory sandboxes to facilitate Fintech innovation. China can adopt one of these sandboxes or set up an innovation center where FinTech startups are allowed to conduct certain financial services under the terms of a conditional or restricted license. If the test succeeds, they will be able to get a full branch license to perform wider services. If failed, then the license will be revoked.”

The concept of digital finance gained worldwide attention when the G20 Summit in 2016 passed G20 High-level Principles for Digital Financial Inclusion, an international accord to embrace digital solutions for a better world.

Xue Hongyan, a senior researcher of Suning Institute of Finance notes that digital finance is the official expression of internet finance. It covers such sectors as digital currency, online payment, mobile payment, e-banking, financial service outsourcing, online insurance, online funds and online stock trading.

As people are seeking for digital solutions and new tech, they have also been subject to risks entailed. For instance, they have been exposed to wild price swings in the cryptocurrency market. Plus, many people fall victim to Ponzi schemes in the name of digital finance.

At present, China is working to address deficiencies in its financial system. Huang points out that China lacks specific rules and regulations concerning shadow banking, digital finance and local government financing.

“In particular, a salient risk concerning digital financial services is that participants are not capable to recognize and afford potential risks. They have no basic knowledge about the industry.”

As to regulation, Huang says that there is a subtle balance between driving fintech innovation and preventing risks.

Huang believes that regulatory standards and framework for traditional financial services is also applicable to digital financial services.

“If we regulate digital financial sectors with different standards, there will be a large room for arbitrage. “

Pan Gongsheng, vice president of the PBOC, explains that three systems are needed for healthy development of digital finance.

“We need to work on a new regulatory system, a prudential regulatory system and a system for market access. New products of the same nature must obey same regulation rules, regardless of the nature of product providers.

At present, third party payment services in China have been granted a license. Though there are no requirements of obtaining a license for network lending industry, but they must comply with strict procedures.