Chinese Bitcoin Exchanges May Require a License According to People’s Daily

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China’s biggest paper and the official newspaper of China’s Communist Party, has warned its readers of the “risks behind bitcoin,” with much of the criticisms familiar, but some of it may shed light on the current regulatory situation regarding Chinese bitcoin exchanges. A translation of the key points follows:

“Bitcoin has been popular for a few years. Price has been up and down, once hit historical record this year. At the peak, the price of one bitcoin reached $1,285.74, surpassing that of an ounce of gold. In China, every ounce of bitcoin is worth as high as about 7000 Yuan (Editor’s note: yes, they wrote “ounce of bitcoin”).

Recently, PBoC officials pointed out that Bitcoin is a network of virtual goods, rather than money and that the central bank is studying the launch of a digital currency, which is essentially different (from bitcoin).

The current bitcoin trading platforms are often mistaken as exchanges. However, they are not. An exchange needs to get a financial license before it can call itself an exchange.

As early as 2013, relevant departments reminded of Bitcoin risks, pointing out that there is a high risk of speculation, a risk of money laundering and a risk of being used by criminals or malice organizations.

PBoC’s Business Management Department Director, Zhou Xuedong, said that, in fact, China’s real trading volume is not particularly large, (the misunderstanding about huge transaction number is) mainly because some institutions and investors wanted to create fake trades.

In the recent on-site inspection, it has been found that some of the bitcoin trading platforms have significant risks. First, some institutions have been suspected of engaging in financial business by violating laws and regulations, including leveraged trades, margin trades, continuous bidding, centralized matching, etc;

Second, some institutions have not yet established compliant internal control systems with the provisions of the anti-money laundering. (Funds) may be used by criminals to become a channel for money laundering. In addition, some platforms are non-compliant, with technical and security risks and platform-related business risks.

Relevant sources pointed out that for ordinary investors, the blockchain technology behind Bitcoin is not easy to understand. Its operation patterns are difficult to grasp. In this case, the risks of rushing into investing in Bitcoin are not small. And currently the use case for bitcoin as payment is very small.

With no national (government) endorsement, Bitcoin does not have the same legal status as legal fiat currency. Therefore, investors should take particular care when considering participating in the trading of Bitcoin.”

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