Earlier this month, major Chinese finance media company Caixin revealed that the People’s Bank of China’s newly drafted regulations on bitcoin trading and local digital currency exchanges are set to be implemented by June.
Until then, on-site inspections on the country’s three largest bitcoin exchanges OKCoin, BTCChina, and Huobi will likely continue. Caixin also reported that the inspections are close to completion and that the three exchanges will have to face administrative punishment before the new regulations are implemented. The local publication noted that Chinese exchanges will have to pay fines for their previous operations that may have violated existing financial regulations in China.
Although the Chinese bitcoin exchange market has made a strong comeback in the past few weeks after reclaiming its title as the second largest bitcoin exchange market behind the US with a 15 percent market share over the global bitcoin exchange market, Chinese traders are still unable to withdraw their funds.
Interestingly, over the last two weeks, an increasing number of investors have started to purchase bitcoin on local bitcoin exchanges despite the temporary withdrawal suspension imposed on all three major Chinese bitcoin exchanges.
More to that, Chinese bitcoin exchanges have begun to request an excessive amount of personal and financial information from bitcoin traders who are simply purchasing the digital currency through regulated trading platforms. Local sources including CNLedger revealed that exchanges including Huobi started to demand face-to-face interviews, submission of bank documents, proof of funds, proof of identity and other documents.
BTCC serves millions of users in China, along with Huobi and OKCoin. The company told its clients on March 24:
“In compliance with anti-money laundering (AML) policies, BTCChina has completed an upgraded know-your-customer (KYC) identity verification system. The new KYC system requires four pieces of identity information, including Full Name, National ID Number, Bank Card Number and Mobile Phone Number.”
However, regardless of the three exchanges’ recent overhaul of their KYC systems, the three platforms will likely have to add changes to their systems after the release of the People’s Bank of China’s newly drafted bitcoin trading regulations.
The important aspect to consider about China’s current bitcoin trading ecosystem and exchange market is that the demand toward bitcoin is continuously increasing even with suspension of withdrawal and strict AML policies. That means, traders aren’t necessarily purchasing bitcoin to avoid capital controls and move funds outside of China. Traders are purchasing bitcoin as mid to long-term investment, with the intent of holding onto the funds.
Therefore, if withdrawals are enabled and new regulatory frameworks are implemented, bitcoin demand in China will likely surge and bitcoin price listed by the Chinese bitcoin exchange market is likely to increase. Since late 2016, the Chinese bitcoin exchange market has portrayed a value of bitcoin that is substantially lower than that of other major bitcoin exchange markets.
If the Chinese market stabilizes, it could act as another catalyst for bitcoin price surge and could trigger yet another upward trend for bitcoin.
