BEIJING - A senior official of China's securities watchdog has called for improved laws on capital markets as rapidly developing financial technology, or FinTech, is posing challenges to traditional financial supervision.

"FinTech innovations that feature internet, big data and artificial intelligence are exerting profound influence on capital markets," said Huang Wei, assistant chairman of the China Securities Regulatory Commission, at a forum.

Describing the challenges as "unprecedented," Huang stressed legal systems should catch up with technological advances.

Tech-based financial transactions should be clearly identified to ensure all deals are under targeted supervision, Huang said, adding that regulatory methods should also tolerate mistakes and allow for corrections. "There should be room for regulators to encourage and guide FinTech development."

Huang stressed, however, that violations in the disguise of FinTech will face severe punishments in a bid to protect investors and defend market equity. "[We will] maintain a bottom line of no systemic risks."

FinTech is booming in China where the financial sector has been open to new technology from mobile payments to online lending.

Business services group EY said in a report that China outperformed India and Britain to rank first among 20 major markets in terms of FinTech usage in areas including money transfers, investments, borrowing and insurance in August.

However, risks have also emerged.

Having reined in rampant peer-to-peer lending and insecure cash loans, Chinese regulators are moving fast to keep abreast with the latest developments and protect market order.

The People's Bank of China, the central bank, set up a FinTech committee earlier this year to enhance research, planning and coordination in the field.