Exploring Regtech: Key Technologies for Combating Financial Crime

Regtech(Regulatory Technology) is a technology aimed at ensuring that industries and consumers comply with laws and regulations. It is most widely applied in the financial sector, as a stable, efficient, trustworthy, and fair financial system is crucial for social development. Regtech can help achieve compliance automation and simplification, which is significant for both financial institutions and regulatory bodies.

The emergence of virtual assets has brought new challenges and opportunities for financial regulation. Compared to traditional finance, the virtual asset market operates around the clock, with frequent cross-border transactions and significant differences in technical details. This requires that Regtech must be able to automatically monitor trading activities in real-time. At the same time, the high transparency of virtual assets also facilitates regulation.

In the virtual asset market, compliance work such as KYC, AML, and MAR requires new approaches. The key is to combine the best practices of traditional finance with technologies tailored for virtual assets. This includes cross-monitoring on-chain and off-chain, real-time operation around the clock, and leveraging artificial intelligence to process risk data.

The cryptocurrency market has some unique forms of financial crime and market abuse. For example, among DeFi tokens listed on major exchanges, 56% exhibit insider trading behavior on decentralized exchanges. Additionally, scammers create a new fraudulent token every 4 minutes on average, attempting to steal investors' funds. These issues highlight the necessity of effective regulation.

Hong Kong is at the forefront of virtual asset regulation in the world. Regtech companies are developing solutions that meet the requirements of the Hong Kong Securities and Futures Commission to help trading platforms identify, monitor, and prevent market manipulation. These solutions can unify compliance and risk management, which is crucial for the effective operation of cryptocurrency compliance programs.

With the continuous development of the virtual asset market, Regtech will play an increasingly important role in maintaining market order and protecting investors' interests. Regulatory agencies, financial institutions, and technology companies need to work closely together to collectively address the challenges and opportunities in this field.