Sept. 22, The Paper news agency reported that the Chinese regulators not only banned the exchange between Bitcoin and other cryptocurrencies and the Chinese Yuan, but they also called for all trading of cryptocurrency to any fiat currency to end.
This carries the implication that all exchanges have effectively been banned.
Shanghai goes further
Furthermore, the regulators in Shanghai have asked for the top management of the exchanges, including the executives, directors, finance team and technical team members, to stay in Shanghai to cooperate for the clean-up activity.
Previously, the Beijing regulators still did not call for trading in all fiat currency to be stopped. However, it was noticed that on Sept. 15 both OKCoin and HuoBi first announced that all cryptocurrency trading in Chinese Yuan will end. The next day, both exchanges modified their announcements respectively to include a plan to end all cryptocurrency trading activities.
The main reason for closing down the exchanges, as authorities tell the public, is because Bitcoin price fluctuates greatly, it is risky and it can be a way for criminal activities to take place. Besides, Bitcoin trading platforms do not have a qualified regulatory system and won’t give sufficient protection to investors, regulators believe.
How the u-turn was happening
In May this year, when Bitcoin price went above RMB 8,000, PBOC arranged talks with the three largest crypto exchanges.
They allowed for the Bitcoin exchanges to handle issues regarding development on their own, so the clean-up activities were carried out correspondingly. Later on, the Bitcoin exchanges were instructed to charge trading fees, to prevent speculating activities, to stop financing services, to implement strict Know-Your-Customers (KYC) policies, to take measures to prevent money laundering and to report back to the regulation department in a timely manner.
In September this year, the regulators called to end all forms of digital currency trading and to return the customer’s funds into accounts that can be audited.
An audit mechanism was then to be established to audit every account to prevent diversion or embezzlement of cryptocurrency funds. All Bitcoin exchanges were instructed to halt new accounts registration, to lower the number of investors and to plan to their own exits from cryptocurrency trading.
When asked about the situation regarding ICO, a source with the regulators explained:
“If a certain ICO’s sole purpose was to raise funds, it will be okay if the funds were returned to the investors, and the case is closed.But if the ICO was used as a way for money laundering, then it should be handled as how it is supposed to be doing just that.”
When asked about how the ICO funds return is being handled, the insider explained that most importantly, the platforms, project owners and investors can come to an agreement and the government’s responsibility is to urge and supervise the return of capital and to protect the rights of the investors.
‘For some projects, there are disagreements between the trading platforms and the investors. For example, some tokens were already trading on the exchanges, and the prices had increased from 1.5 cents to five cents, yet how much should be returned to the investors is not decided by the government. If the parties could not come to an agreement, they should take the legal approach to settle the case.’
When asked about government’s initiative to block access to all foreign platforms, the person informed that as cryptocurrency is a decentralized system, the regulators are having difficulties in the technical aspects. Thus they can only control from the movement of funds.