PBoC’s Orders to Chinese Bitcoin Exchanges Leaked

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A regulatory document listing the requirements for Chinese bitcoin exchanges has been leaked in full. The ten points document specifies many of the already known requirements, but also clarifies a number of aspects which raise significant questions. The document says:

“According to the Notice of the General Office of the State Council on Printing and Distributing the Special Rectification Plan for Internet Financial Risks (No. 21 of [2016]), the Notice on the special rectification and implementation of the Internet financial risk issued by the People’s Bank of China and other 17 ministries (No. 281 of PBOC [2016]), rectification work is conducted on Bitcoin exchanges.”

Among the aspects they are rectifying is a puzzling requirement to have trading fees, showing the willingness of Chinese authorities to directly intervene in the operation of for-profit businesses to demand compliance not just with laws, but also arbitrary policy.

Far more worryingly, the document reveals that it was PBoC which ordered Chinese bitcoin exchanges to stop bitcoin deposits and withdrawals. Article 8 of the document says:

“Depending on the actual inspection results, rectification proposals include but not limited to… the suspension of bitcoin withdrawal services.”

When the Chinese exchanges announced the suspension of bitcoin deposits and withdrawals, they said it was a voluntary temporary action that was estimated to last for only one month. Now, many months later, they still have not resumed normal services, with bitcoin trading at a $200 discount in China. That may be because the document says:

“Proper guidance of public opinions must be handled during the process of rectification. Opinions could be released through the official website, media interviews, expert interpretation and other means. Initiatives shall be taken to release regulatory signals and guide the community expectations.”

If it is indeed the case that PBoC has ordered Chinese exchanges to suspend bitcoin deposits and withdrawals, then the question arises as to whether they ever intend to resume normal operations or whether this “temporary” state is in fact permanent.

China’s central bank has not made any announcement for some time regarding this investigation they opened back in January 2017. Speculation, back then, focused on China’s desire to restrict capital outflows, with many wondering how they’d be able to do so considering that bitcoin is global.

Making it impossible to deposit or withdraw bitcoins from exchanges would be one such way, but that is, in effect, just above an outright ban of the currency. Their latest announcement suggested they had laid out red lines which must not be crossed, suggesting that normal operations would resume, but that was back in March.

The leaked document suggests they may be, instead, taking draconian measures, in a very arbitrary manner, if they do intend to turn the “temporary” suspension of bitcoin deposits and withdrawals into a permanent state.

Now that the document has been leaked we’ll see how PBoC responds and what they will say, but the way the “investigation” has been carried out appears to suggest that they clearly are not very fond of bitcoin nor very respectful of private property rights.

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