China has shut down all cryptocurrency trading platforms and more than two-thirds of online lending platforms as a result of continuous crackdown efforts against illegal and risky practices in the internet finance space, according to a recent central bank report.
Why it matters: China’s internet finance space may face yet more challenges as the county steps up its cleanup efforts amid greater economic headwinds.
- Regulators regard emerging areas of finance, including cryptocurrency trading and online lending, as threats to stability and have tightened scrutiny over the past few years.
- The annual report, released on Monday, evaluates the soundness of the country’s financial system.
Details: The latest Financial Stability Report (2019) by the People’s Bank of China (PBOC) states that China will continue to prioritize financial stability by clamping down on unlicensed businesses in digital payments, online lending, and other internet finance companies.
- Although financial risks are slowly being resolved through its ongoing rectification efforts, there are still plenty of risks in the system, the central bank said.
- According to the report, all 173 Chinese cryptocurrency trading and initial coin offering (ICO) platforms have exited the space and the number of online lending platforms has dropped from 5,000 to 1,490 this year.
- The central bank said it will continue to monitor licensed payment services and increase oversight on unlicensed ones. As of June 2019, 389 unlicensed institutions have been shut down.
Context: China’s effort to contain systemic financial risks has been ongoing since 2017.
- In recent months, China has intensified efforts to clamp down on cryptocurrency activities, urging local authorities to conduct a thorough probe on businesses in the space.
- The central bank released a three-year development plan for financial technology, part of which focuses on strengthening financial risk controls and ramping up financial regulatory efficiency.