PBOC Lists New Rules for Chinese Bitcoin Exchanges

The People’s Bank of China (PBOC) renewed its efforts to regulate bitcoin exchanges this week. Zhou Xuedong, Director of the Bank’s Department of Business Management, which carried out inspections of bitcoin exchanges, outlined some new rules which exchanges must follow.

Also read: Reserve Bank of India Predicting the Future of Bitcoin 

PBOC Adopting a ‘Forgiving Attitude’

Zhou, who is also a deputy to the NPC (National People’s Congress), the national §PBOC Lists New Rules for Chinese Bitcoin Exchangeslegislature of the People’s Republic of China, reportedly revealed the short and long term plans that the PBOC has for bitcoin exchanges. The Chinese media outlet Sina reported him saying that in the short term, clearly defined rules for bitcoin exchanges are necessary. They must establish risk prevention and mitigation policies, and they must be kept under strict supervision, he continued, adding that:

[The regulators] shall adopt a forgiving attitude, not be prohibitive for the time being, and set an observation period.

List of Prohibited Activities

Among the numerous rules Zhou proposed was a list of prohibited activities imposed on bitcoin exchanges. According to Caixin, this list includes:

1. Offering leverage and margin trades.
2. Producing fake volume and manipulating the market using zero fees.
3. Violating AML laws.
4. Violating regulations on foreign currency management and cross-border capital transfer with bitcoin.
5. Replacing fiat by using bitcoin to purchase goods.
6. Tax Evasion.
7. Engaging in false advertising or participating in Ponzi schemes.
8. Providing financial services without a permit, including credit, securities, and futures trading.

There will be penalties and fines for any bitcoin exchanges found to be in violation of these rules, Zhou warned, adding that they can be suspended or forced to withdraw from the market. Serious violators can even be forced to shut down their businesses.

Long-Term Regulatory Plans

Caixin also reported Zhou saying that bitcoin is “a special digital asset that is difficult to be controlled” given its characteristics such as anonymity, being globally distributed and having no physical entity. He said that the PBOC will research the properties of bitcoin, explore management policies for the exchanges at the national level, and also consider licensing a number of qualified exchanges.

The NPC Deputy then proposed a “calm and rational” approach when looking at bitcoin, noting that:

If oversimplified measures such as closing them down were taken, [investors] will be led into the underground black market or OTC markets, which are more difficult to control. Therefore, it is necessary to explore the establishment of long-term regulatory mechanisms.

He was also asked by a Caixin reporter whether the inspections of bitcoin exchanges could be extended upstream to suppliers or downstream to customers. Zhou replied: “From thePBOC Lists New Rules for Chinese Bitcoin Exchanges angle of AML, it is mostly the downstream that should be considered, including withdrawing bitcoin and withdrawing fiat currency. This is a critical step“.

Also, Zhou listed other aspects for exchanges to consider, including account identification, funding sources, capital flows, and abnormal transactions. He sees beneficial uses for blockchain technology, believing that it can be used for reference and for regulating the flow of bitcoin and fiat currency. He suggested how data from exchanges to regulators can be synchronized as the basis for regulation. “And with this data, some of the money laundering information and abnormal transactions can be identified”, Zhou told Caixin.

What do you think of the PBOC’s rules for bitcoin exchanges? Let us know in the comments section below.

Images courtesy of Shutterstock and PBOC; Translation by Bitcoin.com’s correspondents in China

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  • Jidotonii Amzat

    China, one of the biggest economies of the world shouldnt be caged because the government can’t control people’s money. That is not a fair game people!

    • MC Kuky

      I don’t see anything bad in these rules. No5 would be bad if it applied to individuals owning Bitcoin, but it doesn’t. It applies to Bitcoin exchanges only. What they are doing is actually accepting Bitcoin.

      • Sunshine1011

        Well, except this one:

        5. Replacing fiat by using bitcoin to purchase goods.

    • Patrick

      make existing model obsolete by building a new paradigm–> decentralized fiat to bitcoin exchanges

      • Sammi kao

        bitsquare has already done it.

        • Patrick

          need to add cny currency to it still tho

  • Martin C

    The idea that they will succeed in prohibiting people from buying things with bitcoin is ridiculous. That is what bitcoin was designed for. At least they admit that they can’t control it very well and would rather have it in a legal market than a black market where it is harder to control. This means hundreds of millions more will be exposed to bitcoin. No matter what bitcoin is a severe threat to governments and banks which is really really good news since those are the psychopaths that control and enslave the world. Their day has come and cryptocurrencies and smart contracts and decentralization will soon make those demons obsolete. Long live bitcoin. We can finally be free.

  • China, like the rest of the world has no clue on Bitcoin and the blockchain so far. There’s no way they are going to control the whole thing. The best is to just try to maintain the market and prevent their main interest…which is tax!

  • b323130

    It’s good as long as I will get my money back. 😀

  • Tengku Azman

    really China wants to regulate? Crap!

  • Steven Domjancic

    Big banks are ALREADY guilty of a few of those prohibited activities listed, especially 1 & 2, why don’t THEY get punished?

  • Rodrigo Fernandez

    At the end of the day, Bitcoin wil end up regulating governments and not the other way around. 😉

  • Sammi kao

    “4. Violating regulations on foreign currency management and cross-border capital transfer with bitcoin.”

    Exchanges have nothing to do with cross-border capital transfer and there is no way of knowing. bitcoin holder can do that without exchanges. Unless its illegal to exchange fiat to btcoin there is very little you can do.


    4. Violating regulations on foreign currency management and cross-border capital transfer with bitcoin.

    There goes exchanges profit. Thank you OKcoin but we seem to do better without you.

  • Sunshine1011

    The entire supply of bitcoin in the world is just under $20 billion, why does China even care, it is a drop in the bucket if that.