China Regulator Says Fintech Must Serve Real Economy

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One of China's senior financial regulators has stated that the government will only support fintechs that serve the real economy, casting further doubt on the future of virtual currencies and related technologies within China.

Jiang Yang, vice chairman of China's Securities Regulatory Commission (CSRC) was speaking at the Asian Financial Forum to an audience of fintech entrepreneurs. The development of fintechs should benefit the real economy and not "a small group of people", he said in comments reported by the Nikkei Financial Review

Two fintech markets are of particular concern to China's authorities  - cyrptocurrencies and peer to peer lending platforms - because of their rapid growth and loose regulation.

At the same time, both have proved massively popular in China which accounts for roughly half of the world's digital payments and three-quarters of global, online P2P lending volume, according to Pricewaterhouse Coopers. 

"From a perspective of providing convenience to people's daily life, fintech will lead the way to a better future. As regulator, we support the development of fintech, but we also should not ignore the risks," said Jiang.

These risks include the repeat of the New York Stock Exchange flash crash in 2010 as well as a rise in money laundering and financial crime through greater use of digital currencies, according to the regulator.

Jiang stressed that the CSRC has an "open mind" toward the fintech industry before qualifying this with the condition that any services must be for the benefit of the general population, and not ruling out regulatory intervention if this should not prove the case.

"Support is not enough; we need to provide some guidance," he said. "If the companies only benefit a small group of people and their own products, they are not being responsible for the society, the economy and the investors.We need to set regulations first -- what they can do and what they can't do -- so the market has a very clear expectation."

Cryptocurrencies have been a particular focus for China's regulators in recent months. Initial coin offerings have been outlawed by the People's Bank of China, as has the trading of virtual currencies and attention has more recently turned towards crypto coin mining operators.

Not only does China have the most consumers of many fintech services, it is also a big investor in fintech ventures. In January a consortium of state-owned and private sector companies launched a $1.5bn fund dedicated to investing in fintech mergers and acquistions in January 2017.