Chinese authorities are cracking down on the nation’s booming peer-to-peer lending space with new regulations in response to scandals and the shut down of fraudulent companies in the space.
The China Banking Regulatory Commission (CBRC) along with three other government bodies will release a new set of regulations limiting what the platforms are capable of offering users, as well as capping how much individuals and businesses are allowed to raise.
The stiffer regulations follow the arrest of 21 people in connection with peer-to-peer lender Ezubao in February. The largest platform in the country at the time, Ezubao was revealed to be a Ponzi scheme that took as much as ¥50bn ($7.6bn) from as many as 900,000 retail investors.
Under the new rules peer-to-peer firms cannot sell wealth management products nor issue asset-backed securities. They must also use third-party banks as custodians of investor funds and are forbidden to take deposits from users.
Regulators are capping the amount that individuals can borrow to ¥200,000 ($30,000) per a platform and ¥1m ($150,000) from across multiple platforms.
The limit for companies is ¥1m ($150,000) from a single platform and ¥5m ($750,000) from multiple platforms.
Copyright © 2016 FINTECH GLOBAL