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PBOC official says China will unveil new rules to regulate bitcoin trading platforms

Signs on window advertise a bitcoin ATM machine that has been installed in a Waves Coffee House in Vancouver, Canada, on October 28, 2013. Photo: Reuters

China is planning to issue stricter rules to crack down on illegal activities on the chaotic bitcoin trading platforms, a central bank official said on Monday.

In an interview with the yicai.com, a Chinese business news portal, Zhou Xuedong, director of the business administration department of the People's Bank of China (PBOC), hailed the issuance of new rules and regulations to manage the bitcoin trading platforms notorious for facilitating illicit activities such as money laundering and unauthorized financing.

The central bank will collaborate with other related government agencies to supervise the sector, as it has been covered by a sweeping overhaul of the country's problematic Internet financial platforms such as online lenders, Zhou said.

The PBOC official denied the view that bitcoin trading platform can be defined as a kind of bourse, saying that the possibility of bitcoin trading platforms being allowed to operate like a bourse is slim due to its position as a website where virtual currencies are traded.

In the short run, activities including leveraged deals, manipulation of prices, payment with bitcoin and illegal advertising and pyramid schemes will be banned on the bitcoin trading platforms, according to Zhou.

The Chinese government has explicitly announced that bitcoin is not real money, saying that the virtual currency would increase the risks of speculation, money laundering and fraud.

In 2013, the PBOC joined hands with several government agencies including the Ministry of Industry and Information Technology, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission to issue a document to prohibit the Chinese financial and payment institutions from offering services associated with bitcoin transactions.

'Bubbles so big'

On March 2, the value of bitcoin reached a record high at $1,271, and for the first time surpassed the price of gold per ounce.

"For a while, the bubbles caused by speculations of bitcoin were so big ... Anyhow, the virtual goods trading platforms including the bitcoin trading platform need to be supervised surely," Zhou said, adding that the bitcoin will continue to exist because many countries have granted "legal status" to the virtual currency.

Some industry insiders said that many bitcoin trading platforms fabricated big transaction volume with fictitious transaction records in order to draw attention from investors.

"Some economists think that it is a bubble, and it will burst sooner or later," Zhou said.

Zhou also said that the PBOC is not in favor of development of the blockchain technology for bitcoin transactions. "We will definitely encourage and endorse the innovation of the blockchain technology, but we will object to adopting the blockchain technology in a sector full of bubbles." Zhou said.


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