On March 13 the PBOC director of business management, Zhou Xuedong explained some of the reasons behind the recent regulatory inspections of bitcoin exchanges and emphasized how trading platforms are to proceed with their activities in the future.
‘The Bubble of Bitcoin Speculation Was Too Much’
The People’s Bank of China (PBOC) has increased its involvement with Chinese bitcoin exchanges significantly over the past few months. The topic of regulating these types of trading platforms has become a regular discussion between politicians and PBOC executives. PBOC director Zhou has told the press, even more details concerning the recent crackdown on bitcoin exchange regulation.
Zhou explained there are more regulatory guidelines coming soon, focused on anti-money laundering standards. Currently, the guidelines have been sent to bitcoin exchanges for review and advice towards the new measures. The government continues to encourage blockchain innovation, but using blockchain to produce a “bubble” is something the bank will not support, the PBOC director told a local reporter in a recent interview.
“There was a time that the bubble of bitcoin speculation was indeed too much.” said Zhou.
No More Fake Volumes
During the recent inspections, Zhou stated some platforms had altered bitcoin trading volumes in order to attract more customers. Zhou detailed to the reporter that China is different than other countries when it comes to investing. A large number of Chinese investors are young and are more inclined to take risks trading. Zhou says the risks associated with bitcoin trading are significant and trading platforms must be examined and regulated.
“Some economists believe that bitcoin is in a bubble, one that will burst sooner or later,” said Zhou Xuedong’s translated statement. “But technically, bitcoin uses blockchain as its underlying technology. That is a relatively successful application. Some countries have already recognized its legal status and can adopt it as payment tool for purchasing goods, that is to say, they recognize bitcoin’s value. Thus bitcoin may continue to exist. ”
Zhou goes into further detail that regulating bitcoin exchanges will consist of many government agencies working together. “Regulation should be implemented in a comprehensive way — Many departments will play their roles and join the regulation,” explains the PBOC director. For instance, Zhou says bitcoin taxation should be regulated by the tax department.
Bitcoin Trading Platforms Are Just ‘Websites’ and Not to Be Called ‘Exchanges’
One interesting point Zhou emphasized was that bitcoin trading platforms should not be called “bitcoin exchanges.” These types of businesses are just “websites or trading platforms,” the PBOC executive explains stating:
If it (trading platform/website) is called an exchange, it is not allowed unless a relevant department of our country permits it. Many people regard bitcoin online trading platforms as exchanges. These are actually two different concepts.
In order to become an exchange, businesses must get permission from the securities department or get the state consular to approve that type of request. As far as current bitcoin exchanges are concerned, they can only get this permission “in the future if we qualify them as trading platforms for commodities,” says Zhou. However, the central bank director said there is a possibility of a bitcoin trading platform opting to become an exchange.
Zhou adds, “In the long run, they must be included in the local management of commodity trading platforms, under the supervision by the local financial bureau, and implement the main regulatory guidelines and supervision. The PBoC branches, the Securities Regulatory Bureau, Insurance Regulatory Bureau, Revenue Department, the Taxing Department, and others will implement functional supervision.”
What do you think about the regulatory crackdown on bitcoin exchanges in China? Does it matter they cannot be called exchanges? Let us know in the comments below.
Images via Shutterstock, Pixabay, and the publication Yicai.
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