By Zhuo Xian, Department of Development Strategy and Regional Economy of DRC

Research Report No 31, 2015 (Total 4716)

Abstract:

The Internet credit rises from the transplacement between supply and demand in financial system, which is conducive to bolstering the development of small and micro enterprises. Nonetheless, the double effects of both the Internet and finance lead to higher potential risks. The regulatory gaps have already resulted in the driving out of good money by bad money. In addition, the Internet credit market is witnessing a number of risks such as disorderly competition, the absence of law, malicious fraud, and fund pool. The addressing of Intenet credit risks relies on the enforcement of legislative regulations. Measures should be taken to change entity regulation into behavior regulation, set up the threshold for market access, compel information disclosure, nail down business borders, establish appropriate exist mechanism, and bring into play the positive role of self-discipline. Protection for investors is the starting point as well as the goal to resolve Internet risks, thus the legal basis should be perfected, and pluralistic protection means should set up to avoid uninformed investment and clarify the limit for single investment. The third-party custodian system serves as the firewall to reduce the capital risks of Internet credit, hence unified financial claim registration and settlement agencies should be introduced and give play to the role of custodian banks in terms of investment supervision and information disclosure.