Exchange retreats from China market due to regulatory pressure

Shortly after XMEX announced its shutdown, the Bybit exchange announced that it will restrict logins to all accounts registered with Chinese cell phone numbers starting June 15. The exchange was reported to have denied access to Chinese IPs in September last year.

Exchange retreats from China market due to regulatory pressure

Since the State Council’s Financial Stability Development Commission clearly “cracked down on bitcoin mining and trading practices,” regulators have once again shown their determination to rectify the chaos in the cryptocurrency world. Currently, Inner Mongolia and Sichuan have introduced measures for virtual currency mining, and ‘going offshore’ has become an option for many mines and miners.

Compared to the crackdown on mining, the rules and regulations to regulate the crackdown on bitcoin trading practices have not yet been introduced, but for the past half month, Xinhua News Agency, CCTV and other mainstream media have reported one after another on the problems that exist in many aspects of virtual currency mining, trading and financing, including aircoin speculation, fraud, virtual currency money laundering, high leverage trading risks, DeFi coin issuance and so on.

The severe regulatory posture has also put the wind at the back of the sails of platforms operating crypto asset trading. Recently, XMEX, a trading platform that focuses on crypto asset contracts, announced the termination of its operation, and Bybit started to restrict the login of all accounts registered with Chinese cell phone numbers. Some users have observed that normally operating trading platforms are also intentionally keeping their distance from users in the Chinese market, with exchanges such as MXC Matcha and BitMart disbanding their Chinese communities and Firecoin no longer opening up its contract, leverage, ETP and other trading services to new users.

Back in 2013, the Central Bank and many other ministries issued the Notice on Preventing the Risk of Bitcoin; on September 4, 2017, the Announcement on Preventing the Risk of Token Issuance and Financing was issued, requiring the cessation of all token issuance and financing activities, curbing crypto asset speculation and illegal fundraising activities for a long time. By 2021, the country once again took action to regulate the cryptocurrency circle, and exchanges that have long been abroad showed a tendency to respect and stay away in the face of the Chinese market.

Mainstream media reveals the chaos of the cryptocurrency circle

Since May 21, when the Financial Stability Development Commission of the State Council explicitly “cracked down on bitcoin mining and trading practices,” the crypto asset market has been in a low state of shock, and the hype in the domestic cryptocurrency circle has been cooling down.

Mining, as the upstream industry of the crypto asset circle, has been the first to be regulated. The Inner Mongolia Autonomous Region issued the “Eight Measures to Resolutely Combat and Punish Virtual Currency “Mining” (Draft for Comments)” on the 25th, which put forward a clear remediation plan for subjects providing sites for mining, subjects implementing mining behaviors, and offenders using virtual currency for money laundering and illegal fund raising.

On June 2, the Sichuan Energy Regulatory Office also organized a research symposium related to virtual currency mining. According to Cai Lian News Agency, the symposium, the regulator mainly solicited the views of the province’s power and energy enterprises, and did not form any resolution.

The deterrent effect of the regulation made the mining circle make feedback. Some mining operators revealed to Hive Finance that they have shut down all mining operations in China and are ready to find a suitable place to deploy in Kazakhstan. Others said that many miners are ready to send their miners to Russia, Finland, Canada and other countries that allow mining and have a surplus of electricity. Going “offshore” has become the main option for domestic bitcoin miners.

While local regulations for “bitcoin mining” are becoming clearer, the regulators have yet to implement specific measures to regulate “bitcoin trading practices”. During this period, mainstream media such as Xinhua News Agency, Xinhua.com, CCTV and Economic Reference News have issued articles one after another, commenting or reporting on some chaos existing in the cryptocurrency circle, which on the one hand made investors raise their alertness, and at the same time made crypto asset trading platforms tense up their nerves.

According to statistics, Xinhua News Agency issued six articles in a row in the past half month, including “Virtual currency is in chaos, “leek harvesting machine” needs to be rectified”, “Be wary of the new pyramid scheme of speculating air coins”, “Fraud, money laundering, price manipulation, virtual currency has become the “new favorite of crime The New Favourites”? The new cryptocurrency is a financial innovation or a “Ponzi scheme”? , “100 times leverage! The Crazy Cryptocurrency Circle Brings “Outrageous Riches” or “Exploding Position”? The article reveals the problems of virtual currency mining, trading, financing and other aspects.

Xinhua News Agency criticizes the chaos of virtual currencies

On May 24, the Economic Reference News published an article “Rectifying the chaos of virtual currency speculation cannot be delayed”, suggesting that ordinary investors should not participate in virtual currency trading and speculation, and financial institutions and payment institutions should not provide any form of support and services for virtual currency trading.

On June 3, Xinhua Viewpoint issued an article saying that the regulation of virtual currency trading and speculation activities is not a single regulation of a single department, but a comprehensive policy. Relevant departments should be involved according to their respective responsibilities to implement functional regulation. The report mentions that if virtual currencies such as Bitcoin are only bought and sold as virtual commodities, the general public has the freedom to participate in the transaction at their own risk. However, if virtual currencies are packaged as speculative targets for “a million dollars” and attract investors to the trading platform, it is necessary to tighten the fence of the system and protect the interests of the people. 

It is easy to find that air currency speculation, fraud, money laundering through virtual currencies, high leverage trading risks, mining and other phenomena have all been reported in mainstream media reports. Some industry insiders believe that these may become the focus of regulatory crackdowns.

Exchanges distance themselves from the Chinese market

Before specific measures related to China’s crackdown on bitcoin trading were clarified, media oversight was seen as a regulatory signal by the cryptocurrency industry, and platforms engaged in the business of trading crypto assets began to react. Some exchanges have announced the termination of their operations, while others have said they will no longer offer services to Chinese users.

On May 21, the XMEX exchange announced the termination of its operations. The platform issued an announcement saying that in order to respond positively to the joint announcement of the China Mutual Fund Association and other three departments regarding “financial payment institutions shall not carry out business related to virtual currencies”, XMEX will permanently terminate the provision of contract trading, coin trading, C2C trading and other businesses, and that after ensuring that users’ funds have been safely withdrawn, XMEX will officially ban user access and registration, and will also shut down its community services.

Hive Finance learned from XMEX’s departing staff that as early as April this year, there was communication between crypto asset industry practitioners and people close to the regulation. “The concern at the time was that the overall economic trend under the epidemic was bad, the stock market was in the doldrums, and the crypto asset sector had become the only outlet for hot money, which was an unhealthy departure from the trend.

The aforementioned people judged at the time that domestic regulation of crypto assets would come out in the second half of the year, but in April, the platforms were already preparing and ready to shut down. By May, XMEX made the decision to shut down as the regulatory decision to crack down became clear and some mining sites were interviewed one after another.

Shortly after XMEX announced its shutdown, the Bybit exchange announced that it would restrict logins to all accounts registered with Chinese cell phone numbers starting June 15. The exchange was reported to have denied access to Chinese IPs in September last year.

Some crypto asset investors have also noticed that other trading platforms are starting to distance themselves from the Chinese market. Investor Lily told Hive Finance that the Chinese communities associated with her exchange, such as MXC and BitMart, have recently started to clear out, and several Chinese communities have been disbanded one after another, “so it is clear that exchanges are cautious in the face of the regulatory winds”.

Before the regulatory policy came into effect, most of the crypto asset trading platforms registered overseas were operating normally, but kept a respectful distance from the Chinese market. Some investors have noticed that Firecoin no longer provides trading services such as contracts and leverage for newly registered users. In this regard, relevant sources of the platform revealed to Hive Finance that due to the high volatility of the market and in order to protect the interests of investors, Firecoin temporarily does not open contract, leverage and ETP services for new users in some countries and regions.

In fact, since the rise of crypto asset mining and trading, various chaos has emerged in the cryptocurrency circle. Some ICO projects that emerged in 2017 and 2018 ended without any problems or rolled up and ran away after the bubble burst; from 2019 to 2020, some retail investors had suffered large losses due to participation in high leverage trading, and the Plustoken fund tray was thundered; by this year, the soaring price of meme coins attracted many new investors, but they were also hedged in the subsequent plunge.

As early as December 2013, the central bank and many other ministries and commissions issued a “Notice on Preventing Bitcoin Risks”, requiring financial institutions and payment institutions not to price their products or services in bitcoin, not to trade or act as central counterparties to trade bitcoin, not to underwrite bitcoin-related insurance business or include bitcoin in the scope of insurance liabilities, not to provide other bitcoin-related services directly or indirectly for customers, etc.

On September 4, 2017, the central bank and seven other ministries and commissions also jointly issued the Announcement on Preventing Risks of Token Issuance and Financing, which required the cessation of all token issuance and financing activities.

Now, as the crypto asset hype boom is emerging once again, the regulator has once again stepped in to explicitly crack down on bitcoin mining and trading. The mining industry faces the option of going abroad, while the trading industry, which has long been abroad under strict regulation, will have to stay away from the Chinese market.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/exchange-retreats-from-china-market-due-to-regulatory-pressure/
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