China looks set to impose strict regulations on bitcoin with the country’s central bank circulating new guidelines that would require exchanges to identify clients and adhere to banking regulations.
According to The Wall Street Journal, the draft regulations would require Chinese bitcoin exchanges to comply with current banking and anti-money-laundering laws that include the requirement to collect information to identify customers. In addition, the regulations would require exchanges to install systems for collecting and reporting suspicious trading activity.
The report notes that officials could still revise the guidelines, subject to feedback from key stakeholders including banks, the Chinese Government and even the bitcoin exchanges themselves.
While the regulations themselves are still at a draft stage, the potential for regulatory certainty going forward should be a positive for bitcoin in China given the uncertainty unleashed when authorities launched probes into the Middle Kingdom’s largest bitcoin exchanges in January.
That investigation resulted in radical changes to the Chinese bitcoin market including the introduction of a transaction fee of 0.2 percent on all buy and sell orders which saw a 90 percent plunge in bitcoin transactions as the fee made automated arbitrage trading unprofitable.
The introduction of transaction fees didn’t go far enough to appease authorities, with the largest Chinese bitcoin exchanges suspending all withdrawals of the currency pending improved protections against money laundering and other illegal activity in February. Notably, the withdrawals were limited to bitcoin with customers still able to selling their bitcoin and withdrawal their value in cash.
Markets, however, have been spooked by the proposed regulations, which combined with the Securities and Exchange Commission’s decision to not give approval to the Winklevoss Bitcoin ETF saw the price of bitcoin heading south over the weekend after hitting record highs.
At the time of writing bitcoin was trading at $1,040.93, down from a peak of $1288.70 March 3. The price though is a slight recovery after the price of bitcoin dropped below $1,000 for the first time in 2017 to bottom out at $957.55 March 18.
Picture: Public Domain Pictures.
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