Chinese Bitcoin Exchanges Must Halt Margin Trading, Bitcoin Lending, And Futures Contracts

The People’s Bank of China has intervened in the bitcoin world over these past few weeks. To be more precise, the central bank wants to ensure all bitcoin exchanges in the country adhere to strict rules, just like other financial institutions need to do.  After weeks of debating what needs to change, the PBoC finally unveiled the official guidelines for bitcoin trading platforms moving forward.

Clarity On The New Rules for Chinese Exchanges

Ever since the PBoC held various meetings with multiple Chinese bitcoin exchange operators, it became clear something would need to change sooner rather than later. Up until this point, all we knew was how these exchanges need to tighten up their AML procedures, but it appears that is only the tip of the iceberg of changes. Several new guidelines have been introduced, all of which will impact the bitcoin ecosystem in China. However, these changes will bring more legitimacy to the cryptocurrency sector as well.

First of all, exchanges are no longer allowed to artificially increase their trading volume through leveraged trades. This only leads to speculation and volatility, which is not in the best interest of bitcoin at all. Moreover, none of the exchanges can operate on a zero-fee principle any longer. Bitcoin and fiat currency lending is also prohibited from this day forward. Quite an interesting change that will not please most speculators by any means.

Secondly, exchanges will be monitored more closely to ensure they are not violating AML restrictions. Money laundering through bitcoin remains a big concern for regulators, although there has never been proof of such activities taking place across Chinese exchanges. On top of this, exchanges must not evade taxes, which is somewhat of an interesting statement. Bitcoin is not taxable in China right now, although this statement could hint at upcoming changes in this regard.

It has also become apparent the PBoC will ensure exchanges can’t violate foreign exchange rules in the future. Using bitcoin as a form of payment and settlement will be scrutinized closely, although the long-term effect of this new rule remains unknown. It appears there will be something to prevent exchange users from making payments in bitcoin directly from their exchange wallet, albeit that has not been confirmed as of yet. We do know the PBoC will implement a “blacklist’ of addresses, though.

Last but not least, the biggest change comes in the form of exchanges not allowed to operate financial businesses like securities and futures. This change results in a big blow to speculators and traders on Chinese bitcoin exchanges, though. Then again, this is a more than welcome change to keep spectators out of the bitcoin ecosystem. On the other hand, this change eliminates another profitable revenue stream for exchanges, which may result in much higher trading fees moving forward.

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