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Regulation of Internet Finance Imminent

| Jul 14, 2015 07:34 AM EDT

According to media reports, 52 executives have left their positions in leading state-owned financial institutions.

China will soon release a guideline that will regulate Internet finance, according to a central bank official on Sunday at a forum in Shanghai.

The guideline was drafted by the central bank and other financial regulators and will aim to “promote the healthy development of Internet finance.”

Internet finance is widely known in China to refer to loans, investments and other financial services provided through online channels.

The current evolution of finance has paved the way for faster and smoother transaction, from online reservation to management of personal finances on hand-held devices.

"Internet finance is growing very fast and in general we think it has diversified offerings in the financial sector and can help address financial needs of small and micro firms and those in the countryside," said Zhang Tao, a director in the People's Bank of China.

Authorities acknowledge the Internet's potential in facilitating economic activity and investor relations, but the platform is a new frontier for finance.

In a relatively new field, experts warned of possible challenges, such as risk management, defaults, fraud and even online hacking.

Without a regulatory system, the sector will constantly be hampered by illegal network transactions and gaps in information technology security.

The publishing of the Internet finance guideline will attempt to address such issues and decrease the negative effects of inadequate risk and evaluation systems.

Among other things, it is expected that the guideline will aid in protecting the legitimate rights of investors and encourage fair competition.

Zhang explained that current regulations will need to be tailor-fitted to adapt to the environment of Internet finance.

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