{"id":23197,"date":"2017-09-19T20:40:15","date_gmt":"2017-09-19T20:40:15","guid":{"rendered":"http:\/\/ci027cfe71500b2697"},"modified":"2017-09-19T20:40:15","modified_gmt":"2017-09-19T20:40:15","slug":"uncertainty-dominates-china-continues-clamp-down-cryptocurrency","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/business\/uncertainty-dominates-china-continues-clamp-down-cryptocurrency","title":{"rendered":"Uncertainty Dominates as China Continues to Clamp Down on Cryptocurrencies"},"content":{"rendered":"
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China is clamping down on cryptocurrency, that much is clear. But while the developing story dominates headlines, a notable trend is the lack of official information. Chinese officials seem to systematically decline requests for comments, local sources are willing to provide information on condition of anonymity only, while leaked documents remain unverified.<\/p>\n

Despite this lack of clarity, here\u2019s what\u2019s known so far.<\/p>\n

Effects on Trading<\/h3>\n

The most important thing we know for sure is that Chinese bitcoin exchanges will be closing down, or at least exiting China. <\/p>\n

BTCC \u2014 the oldest bitcoin exchange in the world \u2014 was the first exchange to announce they\u2019d be closing shop within the Asian country, by the end of this month. The exchange cited<\/a> guidelines<\/a> published by the Chinese central bank (the People\u2019s Bank of China; PBOC), which initially appeared to only affect ICOs, as its reason for closing down. <\/p>\n

Other exchanges quickly followed BTCC’s lead. ViaBTC<\/a> and Yunbi<\/a> both announced that they\u2019d be ceasing operations by the end of this month. Huobi and OKCoin<\/a>, the two other major Chinese exchanges, announced they would be shutting down too, though not until the end of October. And BitKan, a big over-the-counter (OTC) trading service rather than an order-book exchange, announced<\/a> it would be shutting down as well.<\/p>\n

While the cited guidelines initially did not seem to concern bitcoin, it is likely that Chinese officials have made it clear through separate channels that they do apply to the cryptocurrency.Bloomberg<\/em><\/a> (among others) reports that exchange operators decided to close down after in-person meetings with PBOC officials, and the Wall Street Journal<\/em> reports<\/a> \u2014 based on anonymous sources \u2014 that the PBOC has prepared a set of \u201cdraft instructions\u201d that would ban cryptocurrency trading altogether. These draft instructions have also been leaked<\/a> (translation<\/a>) but have so far not been verified for authenticity.<\/p>\n

The content of the leaked documents is also consistent with warnings issued<\/a> by a Chinese quasi-regulatory body \u2014 the National Internet Finance Association of China (NIFA) \u2014 regarding cryptocurrency trading, published shortly before exchanges announced that they would be shutting down. <\/p>\n

According to the NIFA, Bitcoin exchanges lack \u201clegal basis\u201d to operate in the country. Additionally, NIFA official Li Lihui told<\/a> a technology conference in Shanghai on Friday that a goal of China\u2019s monetary regulation is to ensure that \u201cthe source and destination of every piece of money can be tracked.\u201d<\/p>\n

The Status of Bitcoin<\/h3>\n

As far as official statements go, Bitcoin itself is not banned in China. Owning, using, and \u2014 most importantly \u2014 mining bitcoin should technically not be affected by the published guidelines.<\/p>\n

However, more unverified reports<\/a> (translation<\/a>) consistent with reporting<\/a> from the Wall Street Journal<\/em>, claim that Bitcoin itself will be blocked by the so-called \u201cgreat firewall of China<\/a>.\u201d Specifically, seed addresses, which help to bootstrap any new Bitcoin node, and Bitcoin blocks, necessary to construct the blockchain, would be filtered from internet traffic into China, using deep packet inspection<\/a>. <\/p>\n

Additionally, major foreign Bitcoin exchanges like Coinbase, Bitfinex and LocalBitcoins would be added to the list of banned domains, which already includes sites like Google and Facebook. And even private trading of cryptocurrency arranged<\/a> through chat-apps like Telegram and WeChat, for example, could fall under scrutiny, according to the Wall Street Journal<\/em><\/a>.<\/p>\n

This much stricter stance on Bitcoin, beyond just exchanges but also concerning Bitcoin itself, seem consistent with comments from PBOC Counselor Sheng Songcheng, as reported<\/a> by local news sources like Shanghai Securities News<\/em>. Songcheng was quoted to have said that Bitcoin poses a challenge to China, mentioning money laundering and its potential to curb the nation\u2019s economic policy.<\/p>\n

Furthermore, very recent reports indicate that cryptocurrency exchange operators are currently not allowed to leave Beijing. Local news outlet BJ News<\/em>writes<\/a>:<\/p>\n

\u201c[According to] a number of informed sources, the current special currency trading platform executives and so on are not allowed to leave Beijing, [in order] to cooperate with the investigation. In accordance with regulatory requirements, the trading platform shareholders, the actual controller, executives, financial executives [must] fully cooperate with the relevant work in the clean-up period in Beijing.\u201d (Rough translation.)<\/p>\n

What This Means\u2026<\/h3>\n

Trading bitcoin via dedicated exchange platforms in China is off the table for now \u2014 that is clear.<\/p>\n

But it\u2019s not yet clear how successful a full Chinese Bitcoin blockade could be. It would technically only require a single Bitcoin block of a maximum of four megabytes to make it into China about once every 10 minutes, potentially even through satellite<\/a>, for the entire country to be able to access the blockchain. As such, banning individual Chinese citizens from owning and using bitcoin might prove difficult, even if exchange platforms close down.<\/p>\n

Perhaps an even more important question is what will happen to Bitcoin mining: It\u2019s likely that most of Bitcoin\u2019s hash power is currently situated in the Asian country. While miners should able to connect to the rest of the world, according<\/a> to ViaBTC CEO Haipo Yang, it\u2019s unclear if this connection will be allowed for much longer. If Chinese authorities indeed intend to ban Bitcoin from the country entirely, some Bitcoin mining operations \u2014 both mining pools<\/a> and hash power data centers<\/a> \u2014 will be easy targets to shut down.<\/p>\n

On the other hand, this is not the first time that fears of China \u201cbanning Bitcoin\u201d have been raised. In the past, such concerns have simply been a prelude to stricter regulations by local authorities. <\/p>\n

It has been suggested by Bitmain CEO Jihan Wu, perhaps a bit optimistically, that exchanges will simply require a new license to continue operation. Similarly, it\u2019s been speculated<\/a> that the PBOC may introduce a national digital currency<\/a> as a sort of gateway to cryptocurrency: This would allow the central bank to better track the flow of funds in and out of bitcoin in order to counter money laundering and capital flight. <\/p>\n

Then again, it could make more sense to introduce such a national digital currency as a substitute for Bitcoin, once Bitcoin is effectively banned, as suggested<\/a> by ZeroHedge<\/em>.<\/p>\n

For now, uncertainty prevails.<\/p>\n","protected":false},"excerpt":{"rendered":"

China is clamping down on cryptocurrency, that much is clear. But amid rumors and unofficial leaks, uncertainty over the future of bitcoin in China prevails.<\/p>\n","protected":false},"author":2509,"featured_media":23198,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[197,347,357,97,2692,1127],"class_list":["post-23197","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-bitmain","tag-china","tag-exchanges","tag-mining","tag-pboc","tag-regulations"],"author_data":{"id":2509,"name":"Aaron van Wirdum","nicename":"aaron-van-wirdum","avatar_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/12\/aaron-van-wirdum-96x96.jpg"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/uncertainty-dominates-as-china-continues-to-clamp-down-on-cryptocurrencies.jpg","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/23197","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/2509"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=23197"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/23197\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/23198"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=23197"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=23197"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=23197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}