On April 29, 2019, the State Administration of Foreign Exchange promulgated the Measures for the Administration of the Foreign Exchange Business of Payment Institution (the “Measures”), which came into effect on the day of promulgation, and the Circular of the State Administration of Foreign Exchange on Launching Pilot Cross-border Foreign Exchange Payment Services by Payment Institutions (Hui Fa  No. 7) shall be abolished at the same time.
Scope of application: Small-amount, fast and convenient electronic payment services provided by payment institutions through their partner banks for the market transaction entities engaging in cross-border transactions, including settlement agent services, sale of foreign currency and other related fund collection and payment services.
Registration of payment institutions: Payment institutions are required to be registered in the Directory of Enterprises Engaging in Foreign Exchange before they may conduct their foreign exchange business. The registration requires the following conditions to be met: (1) Possesses the legal qualifications for the relevant payment business; (2) possesses an internal management system and corresponding technical requirements for engaging in foreign exchange; (3) demonstrates the necessity and feasibility for applying for foreign exchange; (4) demonstrates the ability to assess the veracity and legality of transactions, as well as risk control; (5) have at least 5 employees familiar with foreign exchange business (with one of them in charge); and (6) is cooperating with a qualified bank.
Management of market transaction entities: Payment institutions are required to conduct due diligence on the authenticity and legitimacy of market transaction entities, periodically verify and update the relevant materials (including digital images, etc.) and retain them for five years. Payment institutions shall distinguish e-commerce operators from consumers when managing market transaction entities and establish and improve its market transaction entity management system. A negative list management system for market transaction entities shall be established to name the market transaction entities that services will not be provided to, and report to the partner bank every month the negative list and the reasons for the denial of service, with the relevant materials retained for 5 years.
Transaction review: Payment institutions shall setup a system for collecting transaction information built on the principles of authenticity, traceability, auditability and immutability to ensure that the sources of transaction information are objective, credible and legal. The partner bank shall conduct a reasonable review on the authenticity and compliance of the foreign exchange business of the payment institution, establish a spot check mechanism for random checks of some of the business operations and retain the relevant materials for 5 years.
Account management: Payment institutions shall open a foreign exchange reserve account at each partner bank in accordance with relevant requirements for foreign exchange account management (a multi-currency foreign exchange reserve account at a partner bank is regarded as a single foreign exchange reserve account). The foreign exchange business that a payment institution is handling on behalf of market transaction entities shall be conducted through the foreign exchange reserve fund account.
Meanwhile, the Measures contain provisions on the collection and reporting of information, supervision, administration and penalties.