Under COVID-19, the integration of digital technology with the financial industry has accelerated and generated economic and social values in many application scenarios.

How to use digital technology to identify and detect risks in the digital financial sector is an important issue to global government agencies, financial regulatory authorities, and related participating institutions. Guiding principles and technological solutions of digital-Know Your Customer as a form of digital authentication need to fully comply with the requirements of the Financial Action Task Force on Money Laundering.

The task force is one of the most influential international organizations in the field of anti-money laundering and anti-terrorism financing.

Former Chairman of the Hong Kong Securities Future Commission Andrew Sheng said that finance and technology are inseparable, because financial deepening in speed, scale and scope would not have been possible without recent developments in technology, especially in blockchain, 5G, AI and big data. And financial markets have grown despite the pandemic, when working from home was made possible by moving trade transactions and payments online.

Financial technology such as blockchain and face-recognition has made financial operations more secure. FinTech start-ups have improved financial inclusivity by reaching out to consumers and investors by offering new and more convenient services in competition to mainstream banks and brokers. Consequently, mainstream banks, insurance companies, securities firms and asset managers have adopted financial technology and transformed the range, speed and costs of financial services.

After the emergence of cybercurrencies, central banks have conducted experiments in official central bank digital currencies, while more and more mainstream retailers are beginning to consider accepting them as a means of payment. Parallel to the advances in FinTech is the innovation in Regulatory Technology, where digital authentication plays a crucial role in enabling firms and regulators to improve their cyber-security and monitor in real-time developments in financial markets and institutions to maintain overall financial stability.

In short, in the future we will no longer talk about FinTech because technology has become embedded in finance. Technology will be something that is part of daily innovation to cope with life's growing complexities.

Experts in the industry pointed out that in view of the dynamic changes in the balance between innovation and development of the digital financial industry and related risk management, the development of RegTech should be based on high compatibility to globalization, comprehensiveness, and dynamic and regulatory compliance in order to produce substantial effects. Following the trend of emerging digital financial services, the development of digital authentication as a key component of RegTech as the "new infrastructure" is essential for the enhancement of national digital financial industry and the governance of digital economy. In the context of the current trend of increasingly rapid financial innovation, forward-looking thinking and predictive strategies are particularly important for the application of RegTech and cross-border international cooperation.

Anselmo Teng, former chairman of the Monetary Authority of Macao and co-chair of the Alliance for Financial Stability with Information Technology, recently pointed out at his main theme presentation at the 22nd Financial Action Task Force-APG Typologies Workshop that digital Know Your Customer and digital authentication are new forms of infrastructure that provide security for the sound development of digital economy and digital commerce, including international trade, and ensure interconnectivity and effective communication of the underlying binary economy. To underpin the sustainable development of the digital economy, the implementation needs to follow international practices while respecting "international experience and local wisdom".

In China, the digital transformation of the domestic financial industry is accelerating in multi-directions as it has benefited from the comparative advantages of more advanced infrastructure, richer business scenarios, and the larger market scale. With the rapid advancement of digitalization, the application of digital authentication to improve regulatory efficiency and promote market regulation is not only an inevitable path to shape the development of digital finance, but also a technological transformation of regulatory experience that may help the applications to many other sectors.

The co-chair of the Technical Committee of AFS-IT Chiang Chun Yuan said aiming at achieving sustainable development of the digital economy, services supported by digital technology should focus on financial inclusions and healthcare, and avoiding discrimination against the elderly and other people with special needs. At present, some Asian-Pacific jurisdictions have already set up a Digital-Authentication-Center to provide digital authentications to various financial institutions and trading companies registered with the local regulator, which is a good direction to provide multi-stream integrated digital authentication services for individuals and corporations. This effectively facilitates the operation standards of digital financial services and improves the efficiency and safety, as well as the globalization, of digital economy.

Last December,the People's Bank of China (PBOC) drafted the "Measures for the Supervision and Administration of Financial Institutions' Anti-Money Laundering and Countering Terrorist Financing Framework (Revised Draft for Consultation)". The PBOC invited opinions from the public in January. Experts in this field believe that on the basis of accelerating the comprehensive expansion of international anti-money laundering and counter financial terrorism legislation, China needs to strengthen its international cooperation, which includes the anti-money laundering and counter financial terrorism judiciary assistance system, financial intelligence exchanges, cooperation mechanism and networks. In addition, conducting international anti-money laundering and counter financial terrorism training programs, and related studies and research also should be given greater importance.

In terms of empowering financial supervision with digital technology, China should build up its own digital finance model through coordinating the efforts of government agencies concerned, industrial participants, academia and research resources to foster the exploration and application of digital authentication in the field of digital finance and improve the effectiveness of digital financial supervision to ensure financial stability. By this way,China can contribute its wisdom to the sound and sustainable development of digital economy.

The author is a research fellow and deputy secretary-general at the Center for China & Globalization.