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Illustration: Sarah Grillo/Axios

Here's why Ant Group's IPO was pulled on Tuesday: It is one of the most systemically important financial institutions in the world, and at the moment it's barely regulated.

The big picture: Ant provides the technology that powers much of the Chinese economy, from borrowing to saving to investments to insurance. A failure of its systems could have devastating consequences for hundreds of millions of people.

  • Chinese regulators told Ant this week that it needed much more regulation, and Ant agreed. But so long as the coming regulatory regime is uncertain, an IPO seems premature.

What they're saying: While the timing of the Chinese government's actions certainly came as a surprise, their substance has been well telegraphed in recent days.

  • Chinese Vice Finance Minister Zou Jiayi told a recent conference that fintech must not be allowed to dodge regulation, per Reuters. She pointedly added that winner-take-all monopolies are also bad.
  • China’s Financial Stability and Development Committee on Sunday put out a statement about the need to "include all financial activities into the regulatory framework.”
  • Chinese bank regulator Guo Wuping similarly wrote on Monday that Alibaba's credit card and loan products are no different from those issued by banks, per the NYT. They therefore should be regulated the same way, he said.

Between the lines: The IPO would probably still have happened on time had it not been for a recent speech by Jack Ma, the founder of Alibaba and Ant.

  • Ma railed against financial regulators, said that financial regulation was outdated, and claimed technology companies should not be subject to regulation.
  • The irony is that the $35 billion that Ant expected to raise in its IPO would have gone a long way towards assuaging regulators' fears that the company is insufficiently capitalized.

My thought bubble: All banks are technology companies, but in any case technology can break. It's OK if a single computer crashes; it's not OK if a country's entire financial system goes down.

  • If a technology company is also a systemically important financial institution, then it needs to be regulated just as assiduously as any other financial-services giant.

The bottom line: The lack of an Ant Group IPO is bad news for global investors who wanted a slice of a fast-growing financial giant, and is also bad news for the nascent Shanghai stock exchange. But if a delay of a couple of months helps to bring pre-IPO clarity with regard to Ant's future regulatory regime, no long-term damage will have been done.

Go deeper

Sen. Tina Smith: Access to banking is a civil rights issue

Photo: Axios screenshot

Equal access to banking and financial services should be protected under the Civil Rights Act, Sen. Tina Smith (D-Minn.) said on Thursday in an Axios virtual event.

Why it matters: People of color, particularly Black people, risk being racially profiled in visits to banks, yet the Civil Rights Act of 1964 does not identify financial institutions as businesses that must not treat black customers differently. "That loophole makes it hard for victims of racial profiling to win in court," a New York Times investigation found.

14 hours ago - Health

FDA advisory panel recommends Pfizer boosters for those 65 and older

A healthcare worker prepares a dose of the Pfizer-BioNTech Covid-19 vaccine at the Key Biscayne Community Center on Aug. 24, 2021. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

A key Food and Drug Administration advisory panel on Friday overwhelmingly voted against recommending Pfizer vaccine booster shots for younger Americans, but unanimously recommended approving the third shots for individuals 65 and older, as well as those at high-risk of severe COVID-19.

Why it matters: While the votes are non-binding, and the FDA must still make a final decision, Friday's move pours cold water on the Biden administration's plan to begin administering boosters to most individuals who received the Pfizer vaccine later this month.

14 hours ago - World

France recalls ambassadors from U.S. and Australia over submarine deal

Secretary of State Antony Blinken (L), French Foreign Minister Jean-Yves Le Drian (C), and French ambassador to the U.S. Philippe Etienne. Photo: Nicholas Kamm/AFP via Getty Images

France has taken the extraordinary step of recalling its ambassadors to the U.S. and Australia after both countries blindsided their French allies with a new military pact and submarine contract, the French Foreign Ministry announced on Friday.

The backstory: While sealing an agreement with the U.S. and U.K. to acquire nuclear submarines, Australia ripped up an existing $90 billion submarine deal with France. That led senior French officials to accuse the U.S. of a "stab in the back."