An Alliance Forms Under China’s New Bitcoin Regulations
A big shift is happening in China concerning bitcoin trading. After the country’s central bank implemented new regulatory inspections and policies a lot has changed for Chinese bitcoin exchanges. According to regional sources, a meeting took place between two Chinese bitcoin exchanges and financial authorities on February 17 with intentions to form an alliance to address regulatory issues. Additionally, Chinese bitcoin traders are finding alternatives amidst the regulatory confusion and exchange policy changes.
Also read: Call for a Digital Geneva Convention Could Affect Bitcoin
Chinese Authorities and Bitcoin Exchanges Form a Regulatory Alliance
The former vice-governor of the People’s Bank of China (PBOC) XL Wu and other Chinese financial authorities have recently met with representatives from several large chinese bitcoin exchanges to discuss compliance. The meeting at the Museum of Internet Finance saw representatives establish ways bitcoin exchanges can comply with Chinese regulations and form a regulatory partnership.
Ten points were discussed on how bitcoin exchanges could meet the demands of regulators. According to the report, XL Wu added the tenth point, which may protect the privacy of bitcoin exchange users. The new proposed rules includes calls for the following;
- The creation of a specific department for risk control and compliance.
- A system-wide implementation of governance rules and security mechanisms. Third parties will evaluate this procedure.
- Exchanges must refuse to cooperate with risky companies and obey AML/KYC regulatory guidelines.
- Keeping records; companies in the industry should report to both the alliance and local regulators about information of the company including company title, info of the head of the company, business model, risks in the business, risk control mechanisms.
- Educating the public on risks associated with the industry including ICOs.
- Deploy anti-money laundering, anti-telecom fraud mechanisms. Use video and biometrics verification to upgrade real-name (verifying) systems.
- Anti-Ponzi scheme; exchanges must set limits on user withdrawals and add delays to withdraw requests.
- Anti-manipulation and embezzlement policies must be enforced.
- Exchanges must share info to peers, deploying the use of whitelisting and blacklisting.
- A digital asset is also a type of personal asset. So the safety of it also represents the safety of a personal asset. Personal information is abused on the Internet, which is a threat to the safety of personal assets. We ask all blockchain companies to actively protect the safety of personal information.
4/ Former vice governor PBOC, Former vice chairman CIRC, Secretary of Beijing Financial Affairs Bureau attended and spoke at the meeting pic.twitter.com/B72I7Wt0Zg
— cnLedger (@cnLedger) February 18, 2017
Bitcoin Traders Flock to Alternative Markets While Some Exchanges May Begin Lifting Withdrawal Suspensions
Following the withdrawal suspensions, Chinese bitcoin traders have seemingly moved in great numbers to the peer-to-peer trading platform Localbitcoins. Volumes have quadrupled on Localbitcoins reaching the country’s all-time-high. Furthermore, according to the regional publication 8BTC, Chinese high-frequency traders (HFT) are finding different avenues to exchange. The publication states that it is believed that roughly 80 percent of transactions were conducted by HFT traders on exchanges such as Huobi, Okcoin, and BTCC.
An HFT trader tells 8BTC that when the 0.03-0.2% trading fees commenced HFT traders had trouble adjusting and capturing a profit was “almost impossible.” According to the report, many of these traders have moved into other markets such as foreign futures and Over-The-Counter (OTC) operations. According to our own sources in China, “Some of the big high-frequency traders are doing OTC themselves too.” Additionally, 8BTC says the exchange BTCC indicates more bitcoin regulations may be on the way.
Furthermore, bitcoin withdrawals from one exchange are slowly coming back online. On February 20th the smaller bitcoin exchange BTC123 announced it would be lifting its withdrawal suspension. However, the rules for withdrawals have changed, creating a slower process. According to sources users will be able to withdraw five btc or less over a twelve hour time period, on BTC123. If the withdrawal exceeds five bitcoins, users must wait 48 hours for the request to be processed. So far no other bitcoin exchanges have announced lifting withdrawal suspensions.
What do you think about the recent happenings in China concerning bitcoin trading? Let us know in the comments below.
Images courtesy of Shutterstock, and Coin Dance.
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