Note: Zhou Xuedong, president of the Nanjing branch of the People’s Bank of China and a NPC (National People’s Congress) deputy, has been working to promote the rule of law in all elements of the economy and financial services. He led the effort to amend the Law of the People’s Republic of China on the People’s Bank of China and roll out guidelines on Internet Finance.  He expressed wishes to tighten regulation over Bitcoin exchanges when attending this year’s opening of the 5th session of the 12th NPC.

Bitcoin, without ties to any bank or government, is underpinned by blockchain technology, a digital ledger system. It allows users to spend and transfer money anonymously, a handy tool for money laundering and capital flight.

Earlier this year, People’s Bank of China and financial watchdogs in Beijing and Shanghai inspected some bitcoin exchanges and warned them against margin trading and money laundering. Zhou noted that:

“Bitcoin involves a high speculative risk, the price can easily be controlled by opportunistic speculators, generating severe volatility, which makes it difficult for investors to protect their interests and it could be used for such illegal activities as money laundering.”

As such, in 2013, The People’s Bank of China and Five Associated Ministries issued Notice on Prevention of Risks Associated with Bitcoin to precaution against the risk of money laundering and maintain financial stability.

“We shall not shut down domestic Bitcoin exchange platforms for breaches of financial regulations. Instead,  a negative list should be released and an effective supervision mechanism of Bitcoin exchanges must be established by the central government,” Zhou suggested.