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“It Will Take Two or Three Years Before all Exchanges Are Shut Down in China”

Note: Xiao Lei, writer of this article, is a well-known financial commentator and a digital currency researcher.

China Securities Journal and Caixin reported last weekend that regulatory agencies are likely to ban all digital currency exchanges, including leading bitcoin exchanges such as BTCChina, Huobi and OkCoin.

Both China Securities Journal and Caixin are credible news sources. China Securities Journal is a subsidiary of Xinhua News Agency, and one of its missions is to propagandize relevant policies and guidelines concerning economy, finance and securities.

The “mysterious” man mentioned in the news is probably a person who attended the panel discussion on how to impose regulation on the bitcoin economy held in Beijing last week. And the regulatory authority mentioned in the news is a special leading group set up ad hoc last year to manage and control Internet financial risks.

Attached to the State Council, the leading group implements the State Council’s policies to encourage valuable innovations in internet finance and establish long-term mechanism monitoring and crack down any illegal financial activities.

  • The Group believes that the hot bitcoin market is one of the root causes of the craze of cryptocurrencies and ICOs market. In other words, bitcoin market shall be regulated first before regulations be imposed on the ICOs market.
  • Secondly, the Group points that since one can buy any portion of a bitcoin, which is similar to dividing security interest. As such, bitcoin transactions are by their very nature illegal securities activities.
  • Thirdly, the Group clarifies that bitcoin is not the blockchain technology, neither are bitcoin exchanges.

The three statements explain why the group think it is necessary to ban bitcoin exchanges. They want the market get a glimpse of upcoming regulations first and see how the market will react.

Furthermore, the Group notes that digital exchanges are not useful for technical development. Instead, they leave room for crimes to raise fund illegally. And bitcoin exchanges have done nothing to help grow real economy.

Some local governments are supportive of regulatory sandboxes that industrial players have been asking for. But the Group says that “there should be no green-lights”. As to the investment threshold, the Group believes that market risks would be decreased if threshold to be increased, but it will not avoid financial risks and social risks. In addition, if they recognize the legitimacy of digital currencies, they have to endorse them.

In a word, the Group denies all of the prerequisites for exchanges to operate.

Here I’m going to talk a little bit about how to carry out regulations.

The PBoC has the right to determine the nature of many currency and finance services; but it only notices risks and offers suggestions when many departments are involved. The announcement on Sept 4th is actually providing legal basis for the Group.

Though the Group is unanimous that bitcoin exchanges must be regulated, it depends on local governments when carrying out specific rules. Simply, local governments determine to shut down bitcoin exchanges or not. As major exchanges are all based in Beijing, it’s important to analyze Beijing’s policies first.

According to the regulatory document released by the Beijing leading group that is more specific and strict than that of the PBOC,

  •  all platforms must stop services between CNY and tokens/virtual currencies.
  •  platforms shall not provide pricing or serve as information intermediary for tokens or virtual currencies. If the terms are strictly implemented, all bitcoin exchanges should be shut down.

If the document only means to ban ICO tokens, then these platforms would simply transform to bitcoin exchanges. Even worse, if the big three are allowed to operate, then why other exchanges can’t considering no one in the industry has a license? Therefore, I assume the document is not only made to regulate ICOs, but to provide basis to supervise bitcoin exchanges.

As local governments, they will only be more tough when the responsibility fall on their shoulders.

What’s next?

As for major exchanges, they have done some job in account registration and anti-money laundering. Besides, they are relatively legitimate since they have been interacting with the PBOC. And daily transaction volumes of major exchanges surpass over 100 billion CNY. If they were banned altogether, it might bring about tremendous social insecurity. But regulatory authorities could start with limiting new registration and CNY deposit to reduce trade volumes and end up banning all exchanges. This would not be done overnight, probably will take two or three years.

Disclaimer: I personally don’t agree that bitcoin exchanges shall all be banned.

 

 

COMMENTS(10)

  • Simple8.1
    1 week ago Simple8.1

    China Securities Journal and Caixin reported last weekend that regulatory agencies are likely to ban all digital currency exchanges, including leading bitcoin exchanges such as BTCChina, Huobi and OkCoin.Both China Securities Journal and Caixin are credible news sources. China Securities Journal is a subsidiary of Xinhua News Agency, and one of its missions is to propagandize relevant policies and guidelines concerning economy, finance and securities.The “mysterious” man mentioned in the news is probably a person who attended the panel discussion on how to impose regulation on the bitcoin economy held in Beijing last week. And the regulatory authority mentioned in the news is a special leading group set up ad hoc last year to manage and control Internet financial risks.http://news.8btc.com/it-will-take-two-or-three-years-before-all-exchanges-are-shut-down-in-china

  • pitham1
    1 week ago pitham1

    Forget the Chinese news journals, even mainstream world wide media reporting about a possible ban. When publications like Wall Street Journal and Bloomberg start talking about a ban, you have to take them seriously. I am not sure if the Chinese government will achieve its objectives, but it does seem to be trying to crush Bitcoin. The ICO ban was just the first step in a series of efforts.

  • Baofeng
    1 week ago Baofeng

    Quote from: pitham1 on September 12, 2017, 12:12:45 PM
    Forget the Chinese news journals, even mainstream world wide media reporting about a possible ban. When publications like Wall Street Journal and Bloomberg start talking about a ban, you have to take them seriously. I am not sure if the Chinese government will achieve its objectives, but it does seem to be trying to crush Bitcoin. The ICO ban was just the first step in a series of efforts.

    But still the question is why now? But not when bitcoin has in still infancy? I think they are waging this war because they felt that the government are being threaten here. But if they really want to ban local exchanges then so be it. If I’m a Chinese trader I will be moving my funds by now. Maybe to Kraken or Polo as long as its not on the reach of the government. Just pretty sad to hear these news though as China has been the front of bitcoin mining, bitcoin trading in the last couple of years. But this is a perfect opportunity for other country to take the void that China would have left.

  • TraderTimm
    1 week ago TraderTimm

    Was it really so difficult to use “[” and “]” brackets?Also, what is up with this “B4” garbage?Idiocracy was a documentary, apparently.

  • Taki
    1 week ago Taki

    Quote from: pitham1 on September 12, 2017, 12:12:45 PM
    Forget the Chinese news journals, even mainstream world wide media reporting about a possible ban. When publications like Wall Street Journal and Bloomberg start talking about a ban, you have to take them seriously. I am not sure if the Chinese government will achieve its objectives, but it does seem to be trying to crush Bitcoin. The ICO ban was just the first step in a series of efforts.
    So banning of exchangers is just possible? I’m so confused about all this news, too many talks on the forum and natives are saying that they just don’t care and plan to hold their founds in any case.

  • Kprawn
    1 week ago Kprawn

    Quote from: Taki on September 12, 2017, 02:54:11 PM

    Quote from: pitham1 on September 12, 2017, 12:12:45 PM
    Forget the Chinese news journals, even mainstream world wide media reporting about a possible ban. When publications like Wall Street Journal and Bloomberg start talking about a ban, you have to take them seriously. I am not sure if the Chinese government will achieve its objectives, but it does seem to be trying to crush Bitcoin. The ICO ban was just the first step in a series of efforts.
    So banning of exchangers is just possible? I’m so confused about all this news, too many talks on the forum and natives are saying that they just don’t care and plan to hold their founds in any case.

    They do this because they know “nobody” can confiscate your bitcoins. If you have sole possession of your private keys, youcan do with those bitcoins what you want. If those bitcoins are on some Bitcoin exchange, you will have some problems getting it out, if a ban happens. The golden rule –> Do not store large amounts of bitcoins on third party services, where you do not have access to the private keys.  *Bloomberg is a joke…. they are part of the problem. 

  • michkima
    1 week ago michkima

    I think the recent news are just plans to ban the bitcoin exchanges, there is nothing definitive yet. And we all know how long it takes before a law could be created and would take effect. But right now there is no bans yet so I think the fear happening right now is being taken advantage by the whales and they are buying cheap bitcoins right now.

  • BitHodler
    1 week ago BitHodler

    Another article attempting to get the market to plummet (something that hasn’t been successful at their first attempt). Markets will move past this nonsense without much problems after a while, and that’s how it should be.If this news was taken seriously by the major players in this market, we would have seen a massive crash taking the price down significantly lower than what we have seen ~ currently Chinese exchange rates hover around $4000.If we look through all of this, then the correction and the China fud didn’t have that much of an effect on the market, especially when you consider that the overall buy support is extremely thin ~ that’s quite an achievement.

  • Slow death
    1 week ago Slow death

    Quote from: Simple8.1 on September 12, 2017, 01:31:01 AM
    China Securities Journal and Caixin reported last weekend that regulatory agencies are likely to ban all digital currency exchanges, including leading bitcoin exchanges such as BTCChina, Huobi and OkCoin.Both China Securities Journal and Caixin are credible news sources. China Securities Journal is a subsidiary of Xinhua News Agency, and one of its missions is to propagandize relevant policies and guidelines concerning economy, finance and securities.The “mysterious” man mentioned in the news is probably a person who attended the panel discussion on how to impose regulation on the bitcoin economy held in Beijing last week. And the regulatory authority mentioned in the news is a special leading group set up ad hoc last year to manage and control Internet financial risks.http://news.8btc.com/it-will-take-two-or-three-years-before-all-exchanges-are-shut-down-in-china

    I have said several times and I will repeat it again, China is doing its job if there were not many scammers who create ICO and steal millions of dollars from investors and if many exchanges were not accused of money laundering and volume manipulation, there would be no convincing argument for Chinese authorities to engage in ICO and exchange” Looks like this time China finally banned Bitcoin exchanges. (Anonymous source I trust fully) There’s only one response: JUST HODŁ “https://twitter.com/SatoshiLite/status/907664619279343616/photo/1

  • Kemarit
    1 week ago Kemarit

    Quote from: BitHodler on September 12, 2017, 05:44:59 PM
    Another article attempting to get the market to plummet (something that hasn’t been successful at their first attempt). Markets will move past this nonsense without much problems after a while, and that’s how it should be.If this news was taken seriously by the major players in this market, we would have seen a massive crash taking the price down significantly lower than what we have seen ~ currently Chinese exchange rates hover around $4000.If we look through all of this, then the correction and the China fud didn’t have that much of an effect on the market, especially when you consider that the overall buy support is extremely thin ~ that’s quite an achievement.

    I agree with you. Bitcoin price is still trading above $4000, although we have another drop today. But I guess we have weathered the storm, and we could just see occasionally dump moving forward. Although I believe that there will negative news coming our way, I still believed that we withstand it and the more we move forward, the more the news will be irrelevant and totally forgotten. We already seen that we can go on without the Chinese, and if they voided something whether in mining capacity or investors, more are willing to replace them.

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