Jack Ma and his financial technology company have recently experienced significant regulatory scrutiny. On December 26th, the People’s Bank of China, the nation’s central bank, called Ant Group in for discussions, subsequently revealing a comprehensive strategy for the fintech firm to address its regulatory shortcomings.

This meeting occurred just over two months after Chinese financial authorities unexpectedly postponed what was projected to be a record-breaking initial public offering for Ant, citing concerns regarding the company’s adherence to regulatory standards. The central bank stated that the company, initially established as a payment processor for Alibaba’s online marketplaces before becoming independent in 2011, suffered from inadequate corporate governance, disregarded regulatory stipulations, participated in unlawful arbitrage practices, leveraged its market position to disadvantage competitors, and infringed upon the rights of consumers.

Simultaneously, Alibaba, Jack Ma’s e-commerce business, is currently facing an investigation by China’s primary market regulator concerning alleged monopolistic practices.

The banking authority outlined a five-part plan for Ant to ensure compliance. This includes refocusing on its original payment services and increasing the clarity of its transactions; securing the appropriate licenses for its lending operations and safeguarding user data; forming a financial holding company with sufficient capital reserves; restructuring its credit, insurance, wealth management, and other financial services to align with legal requirements; and strengthening compliance within its securities operations.

Following the private meeting, Ant Group announced the creation of an internal “rectification team” dedicated to fulfilling all regulatory demands.

Implementing these changes is expected to take several months and will likely affect Ant’s valuation, which exceeded $300 billion prior to the planned public offering. For example, the government has recently announced intentions to raise standards for technology platforms, such as Ant, when providing loans to individuals, a sector that contributed roughly 35% to Ant’s yearly revenue. This proposed modification, part of Beijing’s broader effort to manage the country’s debt risks, also introduces a new requirement for online microlenders to contribute at least 30% of the loan amount when lending jointly with banks, potentially impacting Ant’s cash flow.

“Ant’s recent interactions with regulatory bodies demonstrate the regulators’ commitment to balancing innovation with risk management by promoting a sustainable approach to reducing financial vulnerabilities,” explained Flex Yang, CEO of Babel Finance, a cryptocurrency financial services company based in Hong Kong, in a statement to TechCrunch.

“Its offerings and services may be either discontinued or redesigned, which will influence its profitability.”

Despite these challenges, some individuals maintain a positive outlook for Ant’s future. “Ant generates substantial value. Considering the long term, the temporary suspension of its IPO has a limited effect on its operations,” Bill Deng, founder of cross-border payments firm XTransfer and a former Ant executive, told TechCrunch.

“From the perspective of the regulators, Ant’s lending scale has grown so considerably that it has surpassed existing regulatory boundaries. It has also, to a degree, impacted the established interests of conventional financial institutions,” he further stated.

The actions taken against Ant have undoubtedly served as a cautionary tale for the wider industry. Notably, JD.com’s fintech division, a competitor to Ant, recently appointed its former chief compliance officer as its new chief executive officer.

Tencent also operates a substantial fintech business, but it may not face the same degree of oversight because the social media and gaming conglomerate is “not nearly as assertive” as Ant in its fintech endeavors, according to a partner within Tencent’s international fintech division who requested anonymity.