Central Bank Official: Negative List Needs to be Developed for Bitcoin Trading Platform Supervision

(Original title: National People’s Congress Representative Zhou Xuedong: Strengthen the supervision of domestic Bitcoin trading platforms)

In recent years, Bitcoin has been sought after by enthusiasts, and the continuous influx of speculators has led to its continuous expansion and sharp price fluctuations. Therefore, many specialized Bitcoin trading platforms have emerged in China, but its anonymity and global and fast trading characteristics are easily exploited by some criminals and become one of the channels for fraud, money laundering, and illegal transactions. In January this year, the People's Bank of China, together with local financial regulatory authorities in Beijing, Shanghai and other places, conducted on-site inspections of relevant trading platforms. The inspection found that some trading platforms had problems such as illegal financing and currency lending businesses and incomplete anti-money laundering internal control systems.

In view of this, Zhou Xuedong, deputy to the National People's Congress and director of the Business Management Department of the People's Bank of China, suggested that in the short term, it is necessary to clarify the bottom line for the supervision of Bitcoin trading platforms, establish a negative list, and do a good job in risk prevention and mitigation; in the long run, it is necessary to learn from international regulatory experience, study the construction of a long-term regulatory mechanism, and maintain financial stability.

"Bitcoin trading platforms have major hidden risks. The first is the risk of customer funds security; the second is the risk of money laundering; and the third is the risk brought by leveraged trading." Zhou Xuedong said that in addition, some platforms also have risks of non-compliant publicity, technical security risks and platform-related business risks.

In terms of the supervision of Bitcoin trading platforms, the People's Bank of China and five other ministries and commissions issued the "Notice on Preventing Bitcoin Risks" in 2013, but overall, relevant regulations are still lacking. At the same time, Bitcoin trading management involves the responsibilities of multiple departments such as financial supervision, industry and commerce, taxation, and network information security. Since a regulatory information sharing and joint law enforcement mechanism has not yet been established, there is no regulatory synergy, which is not conducive to risk prevention and control.

In this regard, Zhou Xuedong suggested that domestic Bitcoin trading platforms should be tolerated and not banned for the time being, allowing a period of observation. However, in the short term, the regulatory red lines for Bitcoin trading platforms must be clarified and strict supervision must be implemented.

"In the long run, it is necessary to study and explore long-term regulatory mechanisms." Zhou Xuedong said that it is necessary to study the financial attributes and commodity attributes of virtual currencies such as Bitcoin, study the nature of Bitcoin trading platforms, explore the introduction of national-level Bitcoin trading platform management pilot policies, and conduct licensing or filing pilots for a small number of qualified trading platforms. At the same time, strengthen the regulatory cooperation mechanism, strengthen industry self-discipline, and build a Bitcoin exchange integrity system.