China: Government Indicates All Virtual Currency Platforms Have Withdrawn from Market

(July 12, 2018) On July 6, 2018, the People’s Bank of China indicated that the platforms trading virtual currencies, such as Bitcoin, and dealing with initial coin offerings (ICOs) in China have “basically all safely withdrawn from the market.” Chinese authorities had identified 88 virtual currency trading platforms and 85 ICO platforms since September 2017 when they started to crack down on ICOs and trading of virtual currencies on exchanges. (Woguo Xuni Huobi Jiaoyi Pingtai Jiben Shixian Wu Fengxian Tuichu [Chinese Virtual Currency Platforms Basically Achieve Risk-Free Withdrawal], XINHUA (July 6, 2018).)

In September 2017, Chinese authorities issued an order to completely ban the practice of raising funds through ICOs—the equivalent of initial public offerings for new virtual currencies—and imposed restrictions on the primary business of virtual currency trading platforms. Since then, such platforms have essentially been shutting down their trading business in China. (LAW LIBRARY OF CONGRESS, GLOBAL LEGAL RESEARCH CENTER, REGULATION OF CRYPTOCURRENCY IN SELECTED JURISDICTIONS 30–31 (June 2018).)

Recently, the government has taken more measures to combat “new varieties of illegal financial activities” that arose after the domestic transactions were shut down. Platforms “going overseas,” for example, would allow Chinese investors to participate in overseas transactions. Up until May 2018, the authorities blocked 110 websites dealing with virtual currencies or ICOs, according to the Xinhua report. (Woguo Xuni Huobi Jiaoyi Pingtai Jiben Shixian Wu Fengxian Tuichu, supra.)

Furthermore, the authorities have pressed payment institutions to strictly implement the requirement of not providing services related to virtual currencies. As a result, Alipay, a big third-party mobile- and online-payment platform, closed approximately 3,000 accounts found to be dealing with virtual currencies. In addition, the public security authority has reportedly investigated over 300 offenses related to virtual currencies. (Id.)

China was once the most active market for Bitcoin trading on exchanges, and Bitcoin traded with Chinese yuan used to account for over 90% of the global trading in Bitcoin. In the wake of the regulatory measures the government has instituted since September 2017, Bitcoin traded with Chinese yuan has dropped to under 1% of global Bitcoin trading, according to the Xinhua report. (Id.)

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