Banks not al­lowed to use Bit­coin

PBOC’s move fol­lows losses by online in­vestors

China Daily (Canada) - - BUSINESS - By WU YIYAO and GAO CHANGXIN in Shang­hai

China’s cen­tral bank barred fi­nan­cial in­sti­tu­tions from han­dling Bit­coin trans­ac­tions af­ter in­vestors lost money on fraud­u­lent online plat­forms for the vir­tual cur­rency. The move also fol­lows an 89- fold jump in the vir­tual cur­rency’s value this year, sup­ported in part by de­mand from Chi­nese in­vestors.

“Judg­ing from its na­ture, Bit­coin is a spe­cific vir­tual com­mod­ity. It does not have the same le­gal sta­tus as a cur­rency and can’t, and should not, cir­cu­late in the mar­ket,” the Peo­ple’s Bank of China said in a state­ment posted on Thurs­day on its web­site.

The cen­tral bank pub­lished the state­ment jointly with the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion, the China Bank­ing Reg­u­la­tory Com­mis­sion, the China Insurance Reg­u­la­tory Com­mis­sion and the Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy.

The vir­tual cur­rency does not bring sys­temic risks to China’s fi­nan­cial sys­tem at the cur­rent stage, said the cen­tral bank, as the num­ber of Bit­coins in cir­cu­la­tion and the mar­ket scale are both lim­ited.

No fi­nan­cial in­sti­tu­tions of any kind should have a di­rect in­volve­ment in Bit­coin deals, it said. Fi­nan­cial in­sti­tu­tions are banned from, among other things, trad­ing, set­tling and mar­ket-mak­ing deals us­ing Bit­coins, it added.

Web­sites that pro­vide Bit­coin-re­lated ser­vices will be asked to reg­is­ter with the coun­try’s telecom­mu­ni­ca­tion au­thor­i­ties.

The cen­tral bank said that the vir­tual cur­rency could be used for reck­less spec­u­la­tion, money laun­der­ing, drug and gun trans­ac­tions, gam­bling and other il­le­gal ac­tiv­i­ties. It could also be used by ter­ror­ists to fund at­tacks, it added.

In­vestors and hold­ers of Bit­coins in China said that the move may limit de­mand for the vir­tual cur­rency in the coun­try, but reg­u­lat­ing the coin also means that au­thor­i­ties rec­og­nize its im­pact on fi­nan­cial mar­kets.

“The ban on Bit­coin trans­ac­tions for fi­nan­cial in­sti­tu­tions may make some in­vestors think that the vir­tual cur­rency will not have the liq­uid­ity they ex­pected, and they may with­draw from the mar­ket,” said Chen Xiao, a Shang­hai-based holder of the cur­rency. “But on the other hand, reg­u­la­tors haven’t banned the use and trad­ing of the coin on In­ter­net plat­forms, so that means that the cur­rency was not la­beled as il­le­gal.”

The Bit­coin was be­ing traded at 5,920.87 yuan ($970) per coin on BTC China, the largest Bit­coin ex­change in the coun­try, at 6 pm on Thurs­day. On Sun­day, the price on BTC China hit 7,395 yuan, an all­time high.

BTC China’s CEO Bobby Lee was quoted by Bloomberg News on Thurs­day as say­ing that the reg­u­la­tors’ move will pro­tect the in­ter­ests of con­sumers.

Lee added that BTC China is seek­ing recog­ni­tion from the au­thor­i­ties for the cur­rency so that it can be used to pay for goods and ser­vices in­stead of be­ing used solely for spec­u­la­tion, the Bloomberg re­port said.

“Bit­coin trad­ing can be con­sid­ered a high-risk ac­tiv­ity. Bit­coin prices are volatile, and can swing wildly, from day to day. Please use ex­treme cau­tion when mak­ing the de­ci­sion to in­vest in, or to sell, Bit­coin. BTC China is not ask­ing users to buy or sell Bit­coin as an in­vest­ment or for profit. All Bit­coin trad­ing de­ci­sions should be made in­de­pen­dently by the user,” says the risk dis­claimer on BTC China’s web­site.

Fraud­u­lent trad­ing plat­forms have been rais­ing con­cerns among Bit­coin in­vestors in China.

“Trad­ing Bit­coin on online plat­forms may not be as trans­par­ent as wiring money online you don’t see the money ar­riv­ing in your bank ac­count soon af­ter the trans­ac­tion; some­times, it may take days to see where your money went,” said Qian Zheng, a for­mer Bit­coin trader.

“I won’t trade Bit­coin again un­til there’s a plat­form that gets le­gal recog­ni­tion from reg­u­la­tors,” Qian added.

Chi­nese po­lice have de­tained three peo­ple who al­legedly op­er­ated a fraud­u­lent online Bit­coin trad­ing plat­form, shut it down un­ex­pect­edly and then van­ished with the in­vestors’ as­sets, the Xin­hua News Agency re­ported yes­ter­day.

Po­lice said the trad­ing vol­ume of the plat­form, which claimed to be based in Hong Kong, grew grad­u­ally and it even­tu­ally ranked fourth in the coun­try.

By the end of Septem­ber, the plat­form had at­tracted 4,493 reg­is­tered users who traded Bit­coin as if they were buy­ing and sell­ing stocks or fu­tures, the po­lice said.

The plat­form closed sud­denly on Oct 26 and its man­age­ment team could not be con­tacted af­ter that, Dongyang po­lice in Zhejiang prov­ince said.

An in­vestor sur­named Qiao lost 90,000 yuan and re­ported the case to the Dongyang po­lice depart­ment, which im­me­di­ately started an in­ves­ti­ga­tion.

Ac­cord­ing to a re­port in Hong Kong-based news­pa­per The Stan­dard, in­vestors might have lost up to 25 mil­lion yuan. Con­tact the writ­ers at wuyiyao@chi­nadaily.com.cn and gaochangxin@chi­nadaily. com.cn

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.