This week, the People’s Bank of China’s, hereinafter PBoC, business management department director Zhou Xuedong told the nation’s regulators that they must adopt a forgiving attitude towards exchanges and not prohibit their operations.
Over the past few months, China’s central bank and the PBoC has actually been praised for their efforts to communicate with local Bitcoin exchanges and introduce efficient regulatory frameworks.
"Unlike several government agencies and regions such as Hawaii, which recently forced the major Bitcoin company Coinbase out of the state with impractical policies, the PBoC has been leading round table discussions with local businesses to come to a consensus on which regulations should and shouldn’t be adopted."
Contrary to the government’s view of Bitcoin in 2013, a period in which the PBoC attempted to ban Bitcoin as a whole, the PBoC is demonstrating optimism towards its local Bitcoin industry.
It brought transparency in Bitcoin trading and reduced market manipulation by pressuring exchanges to implement trading fees of 0.2 percent.
According to PBoC director Zhou Xuedong, the central bank’s vision of Bitcoin development and industry acceptance has changed drastically since 2013. In fact, Xuedong encouraged all the regulators within the Chinese market to refrain from enforcing regulations that may hurt local businesses and operations dealing with Bitcoin.
In the short-term, Xuedong emphasized the importance of establishing a clear and transparent industry standard which Bitcoin exchanges can follow. By doing so, exchanges will be in full understanding of the regulatory requirements prior to launching their operations to the public.
"While Xuedong stated that Bitcoin exchanges will be placed under strict supervision, for the time being, he also noted that during this observation period, regulators will actively communicate with local businesses to ensure that the market grows at an exponential rate."
PBoC to regulators: understand Bitcoin
Local publications including Sina further reported that Xuedong requested regulators to obtain necessary knowledge regarding the properties of Bitcoin. These include Bitcoin’s structure, attributes and characteristics. He implied that regulators shouldn’t try to regulate Bitcoin companies with a shallow understanding of the currency itself.
“In the future, it is necessary to explore long-term regulatory mechanisms. We need to research the properties of digital currencies like Bitcoin, study the characteristics of Bitcoin exchanges and explore management policies at a national level,” said Xuedong.
"One of the nationwide policies that the Chinese government and its central bank intend to adopt is the creation of a cross-exchange database which will sync user identities of exchanges in one single platform."
Xuedong hinted that the PBoC may look into Blockchain technology if necessary.
The approval of such a policy could intensify Know Your Customer (KYC) and Anti-Money Laundering (AML) policies even more in the future and could require existing exchanges to upgrade their KYC and AML systems once again.