US-listed Chinese online brokerage firms, UP Fintech Holdings, and Futu Holdings are in regulatory troubles as China is set to roll out personal data privacy laws. A recent report revealed that the ruling will become effective from November 1.

China has intensified its efforts against crypto companies, as it targeted other technology and cryptocurrency-based companies. And with the pace of the regulatory check, online brokerages could be the next in line to face a stiff challenge.

In response to the report, Futu defended itself by saying that the firm has been upright when it comes to keeping laws and regulations. The company has insisted that “the protection of personal information and data is of top priority,” adding that it is focused on actively cooperating with regulated authorities for the safeguarding of personal information.

And it seems the shares of UP Fintech have started responding to the development, as it slumped by about 20% after the report broke.

The New Rules Will Regulate The Export Of Personal Data

The new personal data rules will be regulating the export of personal data. This will be a big problem for the continuous operation of online brokerages, especially those offering cross-border trading services in China.

Brokerages such as UP Fintech and Futu are not licensed to operate in mainland China. However, Chinese citizens can still open an account and trade on the platform.

They are required to submit certain information, including their tax records, bank cards, and ID cards. But the article is questioning where the collected information is stored and how it is utilized.

Apart from Futu and UP Fintech, Snowball Securities could also be among the online brokerage firm affected.

The New Law Presents A Major Challenge

As it stands, Chinese investors are investing in overseas securities markets via Qualified Domestic Institutional Investors (QDII) or through cross-border connect schemes.

But the Chinese regulators have not given any approval for foreign brokerage firms to offer cross-border services to investors in China.

It’s no longer news that China has tightened its regulatory belt in the financial market. Last week, the Industrial and Commercial Bank of China (ICBC) announced that it will start imposing restrictions on forex and commodities trading companies. The latest development will be a major challenge to online brokerages that have clients in mainland China.