China bitcoin industry will stagnate in the regulation

China bitcoin industry will stagnate in the regulation


2013 is the first year of Chinese bitcoin, is not only the development of mainstream media have reported that bitcoin industry, the large influx of hot money led to bitcoin prices soared to 8000 yuan the highest price in history, more worthy of the industry to remember is a bitcoin bubble attracted the attention of financial authorities, finally in December 3, 2013 by the people’s Bank of industry and information technology, China China, Department of Banking Regulatory Commission, China Securities Regulatory Commission, China Insurance Regulatory Commission jointly issued the “notice on guard against the risk of bitcoin” (Yinfa 2013 No. 289, hereinafter referred to as No. 289). At that time, the industry of No. 289 to generally pessimistic Public opinions are divergent., mainly, but also have a game player thinks the bitcoin is a virtual commodity specific expression is a good reason, is the central bank at least admit that bitcoin is a commodity, since it is a commodity, it should be traded freely. Half a year later, it is necessary to carefully examine the No. 289, after all, it will be the highest standards of regulatory authorities for the bitcoin industry.

A positioning, the regulatory authorities of bitcoin

No. 289 requirements at the outset “correct understanding of bitcoin properties”, that “although bitcoin is called ‘money’, but because it is not issued by the monetary authorities do not have the law, such as monetary compensation of the mandatory property, not the true meaning of money. On the nature, bitcoins should be a specific virtual goods, does not have legal status and monetary equivalent, can not and should not be used as currency in circulation in the market.” This is the virtual goods and positioning is not monetary is the fundamental reason for the regulatory authorities of bitcoin taken to suppress the policy. The logic is very simple, in the evaluation of economic freedom index by the “Wall Street journal and the Heritage Foundation released in Chinese, in the global economic freedom index 2013 ranked 136, economy is not free, Chinese, is one of the world’s financial regulation and monetary control to the most stringent national regulatory authorities, so don’t may admit that the free flow of virtual currency, and instinctively tend to perform to suppress the development of the virtual currency policy.

Two, concerns about bitcoin regulatory authorities

So, where is the regulatory authorities to bitcoin biggest worry? In fact, just two concerns: one is anti money laundering, the two is to prevent risks.

In the anti money laundering, No. 289 requires all branches of the people’s Bank Chinese should pay close attention to trends and trend of bitcoin, research to develop targeted preventive measures, all the branches in the area will be established according to law and provide bitcoin registration, trading and other services into the anti money laundering supervision, and urge them to strengthen anti money laundering monitoring. At the same time, request provides Internet sites bitcoin registration, trading and other services to identify the identity of the user, the user real name registration, registration name, ID number and other information, the major exchanges have implemented this policy.

In the anti risk, No. 289 requires payment of financial institutions, departments and institutions to strengthen the public education and currency risks, strengthen the social public money education in financial literacy activities will be a correct understanding of the currency, a correct view of virtual goods and virtual currency, rational investment, investment risk control and reasonable concept of maintaining their own property into, and guide the public to establish the correct concept of money and investment philosophy. Plainly, the risk is to disseminate bitcoin, public participation control bitcoin.

Anti money laundering for criminals, anti risk refers to ordinary participants. Comparatively, the latter in the current practice is heavy. Because bitcoin really can be used for money laundering and other illegal transactions, but the popularity, the size of the market, estimated that the domestic has not formed the payment instruments with bitcoin such high-end to large-scale money laundering case, the relevant ministries in view of development momentum of bitcoin to pay close attention to, and similar regulatory P2P financing platform to run away. It is mainly to prevent the most likely risk of speculation, after all, at the beginning of this year even bitcoin bitcoin game player that has blown bubble is too big.

And the influence of three regulatory measures and regulatory authorities

If the regulatory authorities of bitcoin’s attitudes and concerns but it is a commonplace talk of an old scholar No. 289, then take regulatory measures is the real knife with blood, there are two main:

The first is required to provide regulatory measures Internet sites bitcoin registration, trading and other services in the telecommunications management agencies for the record. This off for the domestic bitcoin site is not difficult, but there is a vague provisions of this clause: “telecommunications management agencies according to the views of the identification and punishment of relevant administrative departments, in accordance with the law on illegal Internet sites bitcoin to be closed”. There are two problems: No. 289 by the people’s Bank of Chinese, Ministry of industry and information technology, China Chinese Banking Regulatory Commission, Securities Regulatory Commission, Chinese Insurance Regulatory Commission issued five ministries, is not any department which can be identified and punished? The two is what kind of behavior will lead to the punishment of the bitcoin website was closed? It is not clear. So, this is a typical “pocket crime”, now the provisions are not clear, once to deal with almost any discretion.

Second regulatory measures even worse. No. 289 requires all financial institutions and Payment institutions may not engage in bitcoin related businesses. In particular, all financial institutions and Payment institutions may not bitcoin price for the product or service, may not be sold or traded bitcoins as a central counterparty shall not be covered with bitcoin related insurance business or insurance coverage into bitcoin, which blocked the financial institutions and Payment institutions involved in bitcoin industry may. Further, No. 289 requires all financial institutions and Payment institutions shall not directly or indirectly provide other bitcoin related services for customers, including: providing bitcoin registration, trading, clearing and settlement services for customers; to accept bitcoin or bitcoins as payment and settlement tools; conduct bitcoin and Renminbi and foreign currency exchange services; conduct bitcoin storage, custody, mortgage and other services; issue with bitcoin related financial products; the bitcoin as trusts, investment funds and other investment targets. This policy is fundamentally denied the legitimacy to the bitcoin enterprises to carry out any business. I ask, what a lawfully established bitcoin companies do not need to open accounts in financial institutions and Payment institutions? The result is before banks and Payment institutions have canceled the bitcoin trading site to open an account, the transaction site can only take the recharge code way to avoid the problem of no corporate accounts, but strictly speaking, this is in violation of the provisions of the regulations, as the No. 289 financial institutions and Payment institutions may not provide indirect bit bitcoin related services for customers. The future will do the specific scale depends on the regulatory authorities and financial institutions and Payment institutions to implement policies.

From the implementation of the first half of the situation, No. 289 bitcoin industry is extremely unfavorable, it makes the key to bitcoin transactions at any risk may violate the law. Bitcoin trading system without convenient and safe application, other bitcoin is out of the question, the popularity will be more difficult, because the main reason people have bitcoin is bitcoin for payment and transaction. So, when the bitcoin industry in the rapid development of the world, when bitcoin in North America and Europe especially the financial center of the United States, Britain became a remarkable pioneering project, when the author at the time of this writing (late September 13, 2014) saw the US authorities have approved the derivatives exchange TeraExchange launched the first bitcoin swaps news. I could tell that China bitcoin industry will lead to stagnation because of the strict supervision. So Chinese bitcoin industry what hope? The author believes that the most urgent is through various efforts of industry stakeholders, change or relax No. 289 to establish regulatory policies, even if this possibility is slim.

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