Over the past week, inaccurate news regarding the supposed ban on Chinese bitcoin exchanges in mainstream media outlets in China and the US including Caixin, the WSJ and Bloomberg have shaken the bitcoin markets.
Almost immediately after the release of Caixin’s report, bitcoin’s price endured a minor correction, falling to around US$4,100. Despite showing signs of recovery, followup reports from the WSJ, Bloomberg and other Western news publications caused the bitcoin price to decrease to US$3,790.
While some analysts have speculated that the baseless criticism from JPMorgan Chase CEO Jamie Dimon led to the minor downturn, bitcoin experts including Blockstream CEO Adam Back stated that attributing the decline to Dimon’s statement is far-fetched, mainly because Dimon has continually criticized bitcoin since 2014. Back explained:
“I doubt Dimon had any impact. Reaction is just china. I’ve been buying the ‘china bans bitcoin’ dip every time, each time move is smaller.”
What Will Happen to Chinese Exchanges?
Today’s statement from China’s National Internet Finance Association (NIFA) translated by Bitcoin.com read that Chinese cryptocurrency exchanges have no legal authority to operate at the moment, and that exchanges have received many warnings in the past.
However, NIFA, the People’s Bank of China (PBoC) and local financial regulators will not ban bitcoin exchanges. In the near future, regulators intend to release a licensing program to provide Chinese exchanges with a properly regulated ecosystem in which to operate. Hence, in the upcoming weeks, Chinese exchanges will likely face stricter regulations and policies, but will not be banned or suspended.
From a regulatory standpoint, the Chinese bitcoin exchange ban rumors could positively affect Chinese exchanges moving forward, as the government will prepare a set of regulatory frameworks granting local trading platforms legal status and authority to operate within the country.
According to Bitcoin.com, many regional news publications have also stated that the ban will only apply to fraudulent projects and exchanges that are not on par with industry standards and regulations. Leading exchanges like Huobi, OKCOin and BTCC, the three largest bitcoin exchanges in China, will likely be eligible to file for a license if and when the Chinese government officially introduces its new set of regulations for the bitcoin and cryptocurrency exchange markets.
NIFA, PBoC, local financial regulators and regional news publications have clarified that bitcoin is not illegal and that the government is planning on providing a licensing program for bitcoin exchanges in the upcoming months. Several bitcoin exchanges that are not eligible for licensing due to poor Anti-Money Laundering (AML) and Know Your Customer (KYC) systems and a failure to comply with existing regulations could face temporary suspensions.
However, as of now, Chinese financial regulators are focusing on providing stricter regulation and licensing programs to exchanges, not imposing a nationwide ban on bitcoin exchanges.