When Chinese authorities inspected Bitcoin exchanges in January, the Bitcoin community was unsure what to expect – not even the exchanges themselves knew what would come from up on high. But over the following few months, it became clearer where Bitcoin stood in the eyes of the authorities. Crypto Insider spoke with a source, who wished to remain anonymous due to the sensitivity of the situation, who is close to the situation in China.
“What happened over the last two months was a surprise,” admits the source, who is a Bitcoin executive in China. “Particularly with the PBoC and their so-called ‘crackdown’, where PBoC visited exchanges for onsite inspections. Now a few weeks have passed and we have seen exactly what happened. There were some forces in the government that were anti- bitcoin exchanges and were concerned with money laundering and capital flight via bitcoin exchanges.”
There was a contingent of people inside China’s government who wanted to close all bitcoin exchanges in China, the source tells Crypto Insider.
“Now, fortunately, over the last six-to-eight weeks something miraculous happened,” he says. “The people who were more pro-innovation, more forward thinking, have seemingly prevailed. They realized that, even though bitcoin poses challenges to the money system itself, it was integral for bitcoin exchanges to maintain normal operations of bitcoin exchanges for the purpose of regulators having more say in this industry and information about what’s going on.”
The executive suggests regulators eventually understood that, without exchanges, much Bitcoin trading activity would go underground. This is demonstrated by skyrocketing Localbitcoins volumes in China. Exchanges can enforce stricter KYC and anti- money laundering laws, as well as suspicious activities.
“PBoC will work with Bitcoin exchanges to clarify the steps to run a legit bitcoin exchange,” notes the source. “This may not yield licensing regime just yet, but this industry will have oversight and I am very optimistic and happy with the results over the past two to four weeks.”
China-based Bitcoin twitter account and news source, CnLedger, tweeted after the inspections: “BTCC, OKCoin, Huobi: will upgrade AML system according to laws & regulations, pausing BTC LTC withdraw during the upgrade. Estimated time: 1 month”.
The timing of the Chinese government’s actions surprised the Bitcoin industry there. “There is no way around it, with government there is no warning, as the action itself is the warning,” the executive told Crypto Insider. “On the one hand, we were caught off guard, while on the other hand I understand that if they have a new thought they wish to implement, then they come and tell us.” This is what happened in January.
“The anti-bitcoin faction sort of asked PBoC to investigate, which led to the inspections,” the source says. “They were concerned about the bitcoin price being so high, and somehow it was their opinion that Chinese bitcoin exchanges were creating the bitcoin price, and we should try and bring the price back down.”
The executive thought this was peculiar, considering the bitcoin price is not something any of the Chinese exchanges could control.
“It was odd they would have that mentality, thinking we can unilaterally make the market rise and fall,” he said. “Months later that action has gone away, and in recent conversations there is no emphasis with us on bitcoin prices.”
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