Bitcoin will likely end up like internet–Policy signal from Chinese official legal program
Topics in focus, a program whose topic are all handy-picked and which is the most influential legal program on CCTV, has set the most important policy tone for Bitcoin regulation on February 14th 2017.
Now let’s review and interpret the official attitude displayed in the program.
1.The program introduced Bitcoin in an objective and neutral way
Host: the price of Bitcoin has surged by 1 million times 8 years after its inception. Currently, the majority of the trades are done on platforms in China.
As people can exchange bitcoins with cash and many foreign e-commerce sites have begun to receive bitcoin as payment, many swindler groups turns to Bitcoin exchanges as the a way to do money-laundry.
2. Government officials admits that it is impossible to eliminate Bitcoin and the government can regulate bitcoin on this premise.
Li llihui, the former governor of PBoC and the current member of Finance and economic commission of National People’s Congress said:
It is impossible to eliminate Bitcoin.
Interpretation: As it is impossible to eliminate Bitcoin, it is also impossible to eradicate exchanges to make Bitcoin trading out of control. Let alone to crackdown miners.
3. The AML loopholes are caused by platform agencies
In 2104, PBOC called a stop for platforms’ users to deposit cash on exchanges via their private bank accounts. If users wanted to deposit or money into the platform’s accounts, they had to resort to agencies. Then the agencies would transfer money to the exchanges. However, agencies ‘ responsibility and ability to do the AML are incomparable with exchanges,
Here is an example how the participation of platform agency will lead to illegal money laundry in money-laundry case.
The monitoring department found that money have been transferred from the bank account of person A to platform account of person B, a typical feature of money laundry.
Here are conversions among monitoring department exchanges and agency:
Monitoring department to exchanges: Why do you dare receive money when the accounts of platform and bank are not of the same person?
Exchanges: you are not going to close me but you not allowing me to use bank accounts to receive RMB, either. Then I can only receive money from agency. Therefore, it is their responsibility to do AML.
Monitoring Department to agencies: why did you receive money without AML procedure.
Agencies: I have done KYC procedure as I have recorded his ID. However, as I am the only staff in the agency; I am unable to confirm who on earth has transferred money to us.
Interpretation: PBOC has inquired, inspected on site at exchanges and required exchanges to stop coin withdrawal services. Nonetheless, PBOC never said exchanges can’t receive users money through users’ bank accounts. Here is the key: PBOC wants exchanges to shoulder the responsibility. If exchanges follows what PBOC intends to do, the regulation storm will stop here.
4. To Lock up the Bitcoin that has financial features and Bitcoin exchanges into cage of law and monitor
We can easily find the changes of government’s attitude towards Bitcoin
a. In 2013: Five ministries and commissions including PBOC do not recognize Bitcoin as currency, prohibiting financial institutions from providing services for the exchange.
The then governor of PBOC Zhou Xiaochuan said in the Boao Forum for Asia: Bitcoin is not the currency approved by PBOC. Therefore, it is just improper to say that PBOC will crackdown Bitcoin. Bitcoin is like stamps, being collected by people.
This is actually an ostrich strategy: I put you out of the financial sector and I do not want to regulate you. You decide your fate on your own.
In 2013, Chinese government did not care Bitcoin. In 2014, Chinese government used the most stringent policy( prohibiting exchanges from receiving money via users’ bank account
b. In 2017: Government admits that Bitcoin and Bitcoin exchanges have financial features and it should manage the market actively
Now the only pending measure PBOC will take is: How PBOC can monitor the AML process when users withdraw coins on platforms.
Will PBOC close exchanges directly( highly unlikely, very harmful to Bitcoin)?
Or Will PBOC wishes that exchanges can work like coinbase: set withdrawal quota for different level of ID, and if address related to coin join for gambling/black market/money laundry, the users will be blocked?
At the end of the program, the host said:
When government locks Bitcoin into the cage of law and regulation, it can become a normal part of the society permanently
Does that mean Bitcoin will end up like internet?