Bitcoin News – China’s bitcoin transaction may come under tighter rules

CHINA’S central bank issued draft rules to regulate the country’s bitcoin industry and is now seeking feedbacks from major exchanges, a latest move indicating regulator’s tighter control on the transaction of the virtual currency, Shanghai Daily learnt from market insiders.

The drafted guidelines said Chinese bitcoin trading platforms would have to collect and identify clients’ information under the rule of “knowing your customers.” The guidelines also require exchanges to adhere to the current banking and anti-money-laundering laws, imposing transaction fees to avoid market manipulation and following country’s legal compliance of tax payment, according to people familiar with the matter.

The People’s Bank of China distributed the file to major bitcoin bourses last week and is now seeking feedbacks for revision, the person said.

Zhou Xuedong, director of the central bank’s Business Administration unit, advocated for the use of blacklists against exchanges that violate the central bank’s directives during annual National People’s Congress meetings earlier this month, according to Caixin.

Initiating an investigation of the bitcoin industry at the start of the year, the central bank warned to shut down bourses that breach rules on money laundering and foreign exchange, as bitcoin prices surged to an eight-year high, mainly powered by Chinese speculators hoping to gain from the virtual currency’s fast rise.

Major domestic platforms, including Huobi, OkCoin and BTCC, suspended bitcoin trading after central bank’s probe and promised to “block accounts that are suspected of illegal practices.” These platforms said that they welcome the regulation as it would bring guidance for the industry’s development.

In the past month, yuan-denominated bitcoin trades accounted for 17 percent of global volume, down from 97 percent in the past six months, according to industrial data tracker Bitcoinity.

However, market insiders pointed out that a stricter environment of bitcoin trading under the new rules may drive traders of bitcoin to find alternative platforms in or out of the country, while keep the bitcoin price high, if not higher.

“When exchanges lock up most part of the bitcoin stocks, and thus reduce the supply of the currency on the regular market, people may see an even more expensive bitcoin due to investors could go to grey markets for transaction,” an executive of a Beijing-based bitcoin exchange told Shanghai Daily.

Yuan-denominated bitcoin trades on Localbitcoins.com, one of grey bitcoin trading platform based in Ireland, soared to more than 56 million yuan (US$8.1 million) last week. The average trading volume was below 3 million yuan before February.

The price of bitcoin was traded around 7,588.88 yuan as of 16:00 pm today, according to CoinDesk’s bitcoin price index. The price rebounded from a low of 5,555 yuan in January after the central bank launched checks.