China Said to Consider Bitcoin Regulations After Investor Losses
China is considering requiring Bitcoin exchanges to disclose large transactions and confirm the identity of users after investors lost money through a fake platform, two people with direct knowledge of the matter said.
The People’s Bank of China, China Banking Regulatory Commission and other regulators have held discussions about drafting rules for trading platforms that facilitate the buying and selling of the virtual money, said the people, who were not authorized to speak because the information is not public. The Bitcoin exchanges may be forced to inform authorities about sizable or suspicious transactions, they said.
Regulatory oversight may restrain demand for Bitcoin in China, which BTC China said has become the world’s biggest trader of the virtual currency with more than half of global volumes. Bitcoin prices have surged 89-fold in a year, spurring investor protection concerns and prompting former Federal Reserve Chairman Alan Greenspan to call it a “bubble.”
“We’re happy to see the government start regulating the BitCoin exchanges,” Chief Executive Officer Bobby Lee of BTC China, the largest Bitcoin exchange in the country, said today in a phone interview. Regulations would be for “the good of the consumer,” he said. BTC is seeking recognition of the currency so it can be used to buy goods and services instead of being used for speculation, he said.
New rules for Bitcoin may not clarify Bitcoin’s legal status as regulators are divided over the issue, the people said. Two phone calls to the press offices of the PBOC and CBRC seeking comment weren’t returned today.
People are free to trade Bitcoin even as China refrains from recognizing it as a currency in the short term, PBOC’s Deputy Governor Yi Gang was cited by the 21st Century Business Herald as saying last month.
The growth of Bitcoin in China has come amid speculation that regulators may halt trading after police arrested three people on suspicion of stealing money from investors through a fake online exchange.
GBL, a Bitcoin trading platform that began operating in May and had 4,493 registered users at the end of September, abruptly closed on Oct. 26, the official Xinhua News Agency reported Dec. 3., citing police in eastern Zhejiang privince’s Dongyang city.
One investor who reported the case to the police claimed a loss of 90,000 yuan ($14,774), Xinhua reported, saying the total amount of money stolen was unclear. The Hong Kong Standard reported on Nov. 11 that investors may have lost as much as 25 million yuan after the site closed.
The value of Bitcoin traded at $1,130.33 apiece at 2:48 p.m. in Shanghai on BitStamp, an Internet-based exchange where Bitcoins are traded for dollars, euros and other currencies. It was quoted at 6,964.96 yuan on BTC China. The price was $1,217.84 on the Mt. Gox online exchange.
Bitcoin prices are unsustainably high and the virtual money isn’t currency, Greenspan said in a Bloomberg Television interview from Washington yesterday.
A Justice Department official said Nov. 18 Bitcoins can be “legal means of exchange” at a U.S. Senate committee hearing, boosting prospects for wider acceptance of the virtual currency. Fed Chairman Ben S. Bernanke told the Senate committee the U.S. central bank has no plans to regulate the currency.
There are about 12 million Bitcoins in circulation, according to Bitcoincharts, a website that tracks activity across various exchanges. Bitcoin was introduced in 2008 by a programmer or group of programmers going under the name of Satoshi Nakamoto.
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