The integration of cutting-edge technologies like big data, blockchain, and artificial intelligence into the financial sector has sparked transformative discussions—especially in the context of evolving legal frameworks such as China’s updated Securities Law. A pivotal industry forum held in 2020 brought together legal scholars, financial researchers, and technology experts to explore how digital innovation intersects with regulatory reform. This article synthesizes key insights from the event’s second half, focusing on digital currency, algorithmic trading regulation, investor platform governance, and data ownership in capital markets.
Defining the Legal Nature of Central Bank Digital Currency (CBDC)
One of the most anticipated discussions centered around Digital Currency Electronic Payment (DCEP), China’s central bank digital currency initiative. Professor Yuan Dason from Beijing Normal University highlighted a crucial distinction: unlike decentralized cryptocurrencies such as Bitcoin, DCEP operates under a centralized architecture managed by the People’s Bank of China.
A unique feature of DCEP is its dual offline payment capability, allowing transactions even without internet connectivity—a significant advantage for financial inclusion and emergency resilience. Moreover, the system follows a two-tier structure: the central bank issues digital currency to commercial banks, which then distribute it to the public. This mechanism raises an essential economic question: does DCEP generate a money multiplier effect?
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Professor Yuan pointed out that if DCEP bypasses traditional credit creation channels, its impact on monetary policy transmission could differ fundamentally from physical RMB. From a legal standpoint, he emphasized the necessity of formal legislative recognition to establish DCEP’s status as legal tender, ensuring enforceability and public trust. Without clear statutory backing, regulatory ambiguity may hinder widespread adoption and cross-sector integration.
Regulating Algorithmic Trading and Market Manipulation Under the New Securities Law
The revised Securities Law, effective in 2020, introduced stricter provisions against market manipulation—particularly targeting programmed and high-frequency trading (HFT) strategies. Associate Professor Xu Wenming from China University of Political Science and Law dissected these challenges from both technical and legal perspectives.
Algorithmic trading leverages automated systems to execute orders at speeds unattainable by humans, enhancing price discovery efficiency and market liquidity. However, when misused, these tools can facilitate manipulative practices such as spoofing or layering—prohibited under Article 55 of the new law.
Despite global trends toward HFT dominance, China's current market structure still favors low-frequency algorithmic models, partly due to infrastructure limitations and regulatory caution. To strengthen oversight, Xu proposed three reforms:
- Expand the regulatory scope to cover all algorithm-driven trading activities.
- Implement real-time monitoring systems for early detection of suspicious patterns.
- Clarify liability attribution and increase penalties for violations.
These measures aim to preserve market integrity while encouraging technological innovation within defined boundaries.
Governance Challenges in Internet Securities Platforms and Retail Investor Markets
Why hasn’t China’s securities sector seen the same tech-driven revolution as its payment industry? That was the central question posed by Shi Guanglong, Deputy Secretary-General of Tencent Financial Research Institute.
He identified three prerequisites for technological breakthroughs in financial services:
- Emergence of large-scale platform enterprises.
- Deployment of cost-reducing technologies.
- Clear regulatory pathways enabling compliance.
While the first two conditions are met—evidenced by millions of retail investors and advanced fintech solutions—the third remains underdeveloped. Unlike third-party payments, which gained legitimacy through early regulatory sandboxing, online securities platforms face ambiguous legal status when offering brokerage or investment advisory services.
Shi suggested that empowering compliant platforms to serve retail investors could catalyze a Chinese-style fintech miracle in capital markets—similar to what Alipay and WeChat Pay achieved in payments. The key lies in designing a regulatory framework that lowers transaction costs while protecting investor rights.
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Legal Ownership and Data Rights in Securities Exchanges
As trading becomes increasingly data-driven, the question of who owns securities transaction data grows more urgent. Li Gengkun, a graduate researcher at Hainan University, argued that current practices grant exchanges excessive control over trading data—effectively creating monopolies that stifle innovation.
Drawing from the Civil Code and Securities Law, Li proposed a tiered classification model:
- Basic and generated data: Classified as quasi-public goods due to their social utility and non-exclusivity.
- Derivative data: Treated as private property, incentivizing commercial development.
To promote fair use and competition, he recommended amending Article 109 of the Securities Law to include comprehensive rules on data scope, ownership, obligations, and transfer mechanisms. Additionally, recognizing data as a property-like right within civil law would provide stronger legal protection for stakeholders across the financial ecosystem.
Open Dialogue: Bridging Theory and Practice in Financial Regulation
Following formal presentations, panelists engaged in an open discussion highlighting gaps between academic theory and market practice.
Aligning Investor Protection with Industry Realities
Associate Professor Zhao Yin from Southwest University of Political Science and Law noted that innovations like robo-advisors often face implementation hurdles despite strong theoretical foundations. Information asymmetry between investors and institutions complicates fiduciary duty enforcement, leading to discrepancies between legal standards and operational practices.
While acknowledging improvements in the revised Securities Law, Zhao stressed the need for better alignment between regulation design and frontline execution—especially in balancing investor protection with brokerage profitability.
Leveraging Big Data and Blockchain for Regulatory Efficiency
Huang Fang, Senior Partner at Zhengxin Law Firm, emphasized the value of real-time transaction data in regulatory supervision. She suggested using third-party data sources to cross-validate official records—an approach that enhances transparency and reduces fraud risks.
Moreover, she advocated for government-led data-sharing platforms modeled after blockchain principles. By introducing incentive mechanisms—such as compensation for data contribution—public agencies could overcome internal resistance to information flow while maintaining security and accountability.
Optimizing Data Governance with Emerging Technologies
Yang Guang, Associate Researcher at the China Securities Finance Corporation, echoed support for blockchain-based solutions in data rights verification. He affirmed Xu Wenming’s views on strengthening anti-manipulation frameworks and called for continuous refinement of data governance models to keep pace with technological change.
Frequently Asked Questions (FAQ)
Q: What is DCEP, and how is it different from Bitcoin?
A: DCEP (Digital Currency Electronic Payment) is China’s central bank digital currency—fully backed by the government and centrally issued. Unlike Bitcoin, it is not decentralized, cannot be mined, and supports offline transactions.
Q: Does algorithmic trading violate the new Securities Law?
A: No—algorithmic trading itself is legal. However, using algorithms to manipulate markets (e.g., spoofing) violates Article 55 of the Securities Law and is subject to strict penalties.
Q: Can retail investors benefit from fintech platforms like they did with mobile payments?
A: Potentially yes—if regulators create clear pathways for compliant platforms to offer brokerage and advisory services while ensuring investor protection.
Q: Who owns stock market trading data today?
A: Currently, exchanges hold dominant control. Experts argue for a balanced model where basic data serves the public good while derivative data can be commercially exploited.
Q: How can blockchain improve financial regulation?
A: Blockchain enables transparent, tamper-proof record-keeping. It can enhance data traceability, support smart contracts for compliance, and facilitate secure inter-agency data sharing.
Q: Is there a risk that digital currency will disrupt traditional banking?
A: DCEP uses a two-tier system to avoid disintermediation. Commercial banks remain critical intermediaries between the central bank and users.
The convergence of big data, blockchain, artificial intelligence, and modern securities regulation marks a turning point in China’s financial evolution. As technology reshapes market structures, forward-looking legal reforms will be essential to ensure fairness, stability, and innovation.
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