Shenzhen Bans Unauthorized Gold Trading After $1.4B in Losses
Shenzhen's financial regulator bans unauthorized gold trading after $1.4B in retail losses. New rules target leveraged schemes, digital channels, and unhedged dealers like Jieworui.
Shenzhen's Local Financial Regulatory Bureau issued a formal prohibition order on February 20, 2026, banning unauthorized gold trading practices across the city's Shuibei jewelry hub, following an estimated US$1.4 billion in retail investor losses tied to the collapse of major dealer Jieworui.
Sweeping Ban Targets Digital Gold Trading Channels
The order prohibits pre-fixed pricing arrangements, leveraged trading, deferred settlements, and principal-protected investment schemes offering fixed returns. Authorities explicitly banned gold trading conducted through WeChat groups, mobile apps, and websites, even when disguised as recycling or material sales transactions.
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The bureau stated that jewelry dealers are not licensed financial institutions and cannot manage assets or offer unauthorized investment products. Violations involving illegal operations, fraud, or illicit fundraising could trigger criminal investigations.
The Shenzhen Market Supervision Administration and Cyberspace Administration are conducting joint inspections of Shuibei platforms for illegal financial activity.
Jieworui Collapse Triggered the Crisis
Jieworui, operating under an "empty agreement pricing" model, allowed clients to trade virtual gold balances and take short positions without any physical metal changing hands. The company recruited retail investors through social media, offering fee waivers, competitive pricing, and entry deposits as low as 2.4% of contract value.
When gold prices surged from approximately US$4,400 per ounce in early February 2026 to US$4,969 per ounce by February 20, Jieworui's unhedged short positions generated catastrophic losses. On January 19, the company began rejecting client withdrawals. By January 25, it applied for government supervision to liquidate assets.
Jieworui's restructuring proposal offered clients either 20% immediate settlement within seven days or 40% repayment over one year, leaving investors facing losses of 60% to 80% of their capital.
Yundiandang, a second Shuibei dealer, suspended all client withdrawals on January 31, citing compliance violations after experiencing three successive waves of panic-driven withdrawals in the 12 days following Jieworui's collapse.
Regulatory Arbitrage Exposed by Price Surge
Regulated gold exchanges in China require margin payments of approximately 150,000 yuan (SG$27,489, ~US$20,400) per kilogram. Many Shuibei traders bypassed this threshold entirely by operating outside licensed exchange infrastructure, making their schemes attractive to retail investors but structurally unsustainable under sustained price pressure.
China's shadow banking assets stood at RMB 53.3 trillion in 2024, providing the broader context for the Shenzhen crackdown. Authorities had issued warnings to unnamed Shuibei companies in late 2025 before escalating to the February 20 prohibition order.
Enforcement Follows Established Regulatory Playbook
China's elimination of RMB 800 billion in P2P lending platforms between 2019 and 2020 provides a direct precedent. In that case, regulators identified unlicensed financial intermediation, issued warnings, then executed a managed shutdown without triggering broader financial instability.
China's amended Anti-Money Laundering Law, effective 2025, expands mandatory compliance obligations to fintech and non-financial sectors, requiring customer verification and transaction tracking. Legal experts warn that if company executives abscond or firms prove insolvent, cases could be reclassified from civil insolvency to criminal charges of illegal fundraising or fraud.
Investors have reported Jieworui's case to the Shenzhen Economic Crime Investigation Department. No formal criminal charges had been filed as of the reporting date.
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