Huobi and OKCoin are said to have collectively invested around RMB 1bn ($150m) of idle client funds into wealth management products (WMPs) offered by banks, according to state-run Xinhua News Agency, citing an investigation made by the People’s Bank of China.
WMPs have been under tight monitoring by the regulators since last year as they are considered a convenient vehicle for banks to issue off-balance sheet loans to corporates. The aggregate amount of these products reached RMB 29.05trn ($4.36trn) last year, up 25% from 2015.
Commenting on the allegations, OKCoin said in a Quartz report that it has a strict policy of placing idle client funds into lower-risk banking products and does not use client funds for its own gain.
Chinese authorities have been tightening regulation of the digital currency. In February, for example, the central bank warned Bitcoin exchanges against margin trading and money laundering, according to a separate Xinhua report. The warning caused a collective fall in the daily transaction volume of the country’s three major Bitcoin trading platforms, BTTCChina, Huobi and OKCoin, to 6,000 from 20,000 within a week after PBOC’s warning.
In an earlier Xinhua report, the PBOC said in January that it will also continue its investigation into the country’s bitcoin exchanges and look into payment and settlement, money laundering, foreign exchange currency, as well as information and fund security.
Regulators around the world are increasing scrutiny over virtual currencies. The Monetary Authority of Singapore, together with Singapore’s Commercial Affairs Department, have warned investors about the risks of virtual currency-related investment schemes.
The US Securities and Exchange Commission also issued a statement warning that “virtual coins or tokens that are offered or sold may be securities. If they are securities, the offer and sale of these virtual coins or tokens in an ICO are subject to the federal securities laws.”
