PBOC plans to set up P2P custodians to prevent fraud

The People's Bank of China plans to introduce third-party custodians into peer-to-peer lending, after numerous cases of fraud emerged last year connected with this emerging mode of financing.

Peer-to-peer lending refers to direct lending to unrelated individuals without the involvement of any financial institution as an intermediary. P2P lending takes place online through specialized websites.

P2P companies are supposed to act only as brokers, but many in China started raising funds directly. Numerous cases of fraud involved with this activity drew the attention of regulators.