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China’s Central Bank Issued Warnings to Cryptocurrency Transaction, Official Publications

China’s central bank released in a long post lashing out at the cryptocurrency trading platforms titled “3.15 Protection of Financial Consumption Rights and Interests” on March 22.

The post displays three problems existing in the crypto exchanges by several pictures as follows:

Click farming

The post reveals that the average turnover rate of the top three Chinese cryptocurrency platforms registered overseas is significantly higher than that of foreign licensed exchanges, which deserves a suspicion of fraud transactions with bots.

Malicious downtime

Sometimes crypto exchanges break themselves down deliberately to force leveraged trading positions lost. The post reveals that a large-scale crypto platform has six system downtime in a year, three of which are unexpected downtime for unknown reasons.

Money laundering

Through the data analysis of the withdrawal of a crypto trading platform, China’s central bank found that it conforms to the basic characteristics of money laundering.

Analysis in this post indeed relatively professional, which points out several serious problems existing in the current crypto exchange. The post also pointed out that the claim that Bitcoin is a safe haven is false as it is too volatile. The bank urges people to protect themselves from following the crowd by abstaining from crypto investment.

Bitcoin trading volume report submitted by Bitwise to SEC mentions that 95% of the trading volume of the crypto exchange is forged. According to the report, the trading volume claimed by ZB and Lbank maybe 390 times and 4400 times of the real trading volume, and that of Huobi, OKEx, and Bibox is also suspected of being cheated (tens to tens of times).

Since the beginning of this year, Binance has experienced many downtimes. At 5 p.m.on March 4, there was a trading suspension in Binance. CZ, CEO of Binance claimed the reason for the transaction suspension was the failure of the information agency. During the downtime, Binance suspended recharge, cash withdrawal, spot and leverage transactions, C2C transactions and fund transfer (subaccount, leverage account, contracts account, and fiat money account).

Money laundering has been a hot topic recently. On March 2, 2020, two Chinese nationals were charged with laundering over $100 million worth of cryptocurrency from a hack of cryptocurrency exchange by U.S. Department of Justice.  The funds were stolen by North Korean actors in 2018.

Although the post is of science popularization, it shows that the research, analysis, and monitoring of the current crypto exchange by China’s central bank is in a relatively clear stage, the control measures in the future are bound to be strict as well.

However, there are also calls from professionals in China for China’s central bank to regulate the cryptocurrency into a reasonable track as compliance progress made by South Korea, France, India governments recently, otherwise, there is no effective regulatory means for the above issues in China.

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