After the recent crackdown on ICOs, China’s official press agency released another statement in which it condemned the use of virtual currency in illegal activities. The press agency stated that the regulators of financial institutions in China should take a hard-line approach against cryptocurrency, preventing criminals from using the cryptocurrency platform to launder money through bitcoin exchanges.
The regulations proposed by the agency seem to indicate that the government plans to introduce a licensing process for bitcoin exchanges in the future. The Xinhua News Agency called for the regulators to take a “zero tolerance” approach to cryptocurrency crimes. Xinhua is the official government press agency whose president sits on the Chinese Communist Party’s Central Committee.
This comes after the crackdown by regulators against ICOs. ICOs have been method of choice of Chinese startups to get their funding. The regulatory committee made it illegal for ICOs to be used or for investors to contribute to foreign ICOs. The comprehensive prohibition by the regulatory committee forced bitcoin trading platforms to voluntarily shut down their operations. A number of exchanges, including the world’s longest running bitcoin exchange, BTCC, have shut down. Some exchanges, however, have been given until the end of October to shut down their operations.
Xinhua further states that most of the Bitcoin investors will try to bypass the Chinese regulations by using foreign trading platforms located in Japan and South Korea. These investors are trying to take advantage of gaps in regulations. The agency reported:
“There are still many regulatory vacuums in the field of virtual currency, which require governments and central banks to give enough attention to the regulation as soon as possible.”
Xinhua calls for stricter regulations that target the cryptocurrency exchanges, as well as measures such as licensing, record-keeping, strict AML/KYC policies, and transaction limits in order to reduce the chances of illegal funds being used in the exchanges. Such policies would open the door in the near future for a licensing program that would allow the trading of bitcoin to resume, albeit within a heavily regulated and checked environment.
However, licensing program may require a significant amount of time to set up, as it will take time to satisfy the required regulations and formalities.