China to regulate cryptocurrency market from the 1st of October

Jinse.com has reported that Chinese authorities are planning on regulating the cryptocurrency market by classifying cryptocurrency a virtual assets. The regulations were incorporated into the “General Principles of the Civic Law of the People’s Republic of China” legislation that was passed on the 15^th of March 2017.

Jinse has reported that the legislation will come into effect on the 1^st of October 2017. Here, the cryptocurrency market will be regulated for the very first time. The news report suggested that the Chinese authorities will treat the cryptocurrencies as “virtual property.” The Chinese academic, Professor. Deng Jianpeng of Pennsylvania State University, stated that the bitcoin can be considered as virtual assets of people who intend to trade them.

The passing of legislation suggests that the Chinese authorities do not intend to pursue their recent crackdown of cryptocurrencies and the authorities will not prohibit the use and possession of cryptocurrencies. Jinse reported that the regulators in the Chinese government did not mention a country wide ban on the use of cryptocurrency and this suggests that the government does not consider bitcoin a problem by itself.

Problems arose when the Bitcoin platform started being used for illegal purposes, such as money laundering and tax evasion. The Chinese authorities were forced to take action against the illegal cryptocurrency exchanges in order to bring this corruption under control. The legislation also pointed out that the cryptocurrency exchanges will be allowed to reopen after the investigation by the People's Bank of China is completed. This implies that the ban is temporary and has only been put in place by the Chinese authorities to deal with corruption, money laundering, and other crimes that were rampant in small platforms.

As mentioned in a previous report, two of the biggest cryptocurrency exchanges in China, Okcoin and Huobi, will be allowed to continue trading until the end of October. Whereas, other exchanges, such as BTCC, stopped trading in Yuan in the last week of September and reported that they will stop their operations by the end of the month. The BTCC exchange will continue to process withdrawals until the end of October.

The outcome of the legislation is controversial and some say that as a result, the surviving exchanges in China will be the only exchanges that will be allowed to continue trading in cryptocurrencies in the future, when the ban is lifted. The impact this will have in the greater cryptocurrency market is yet to be observed and one can only speculate at this time.