Rectification Guidelines for Chinese Bitcoin Exchanges (Full Text)
Note: It’s the first time that the documents that gives rise to the regulatory storm on bitcoin exchanges was exposed to the public. The document was reposted by Fengjiling, 8btc forum moderator. The document confirms that the suspension of bitcoin withdrawal is direct order from the authority. Below is the full translation of the leaked document.
Article 1 Scope of application
This guideline applies to all bitcoin trading platforms that are found across the country.
Article 2 Objectives
The purpose is to crack down and abolish illegal financial operations on Bitcoin exchanges, to maintain the order of Bitcoin market, to prevent financial risks and to protect investors’ interests.
Article 3 Legal basis
According to the Notice of the General Office of the State Council on Printing and Distributing the Special Rectification Plan for Internet Financial Risks (No. 21 of ), the Notice on the special rectification and implementation of the Internet financial risk issued by the People’s Bank of China and other 17 ministries (No. 281 of PBOC ), rectification work is conducted on Bitcoin exchanges.
Article 4 Working mechanism
The local regulation office is to take the lead to implement the rectification work, together with the local branch of the People’s Bank. If necessary, other financial regulators or government departments are required to support.
Article 5 Work flow
Guidance counseling with the person in charge to carry out on-site inspectionput forward rectification proposals to report rectification progress regularly
Article 6 The focus of guidance counseling
1. Not to allow fiat loaning and Bitcoin loaning;
2. Transaction fee must not be zero;
3. No engagement in money laundry.
4. No violation of the relevant regulatory requirements on foreign exchange management;
5. Not to engage in illegal payment business;
6. No more business operation beyond the scope stated on the business license;
7. Not to violate industrial and commercial advertising and other laws and regulations;
8. Not to violate laws and regulations of national securities and futures.
Article 7 Inspection items
1. The basic information of the platform
Including registered capital, operating entity, shareholder structure, related business qualifications.
2. Operation of the platform
The following information shall be submitted: the amount of deposit and withdrawal from 2016 to present date of 2017, the amount and quantity of transactions, rates and fees and Bitcoin trading model.
3. Whether the exchange violates the relevant provisions of exchange platform
Whether the order book is matched electronically, the use of standardized contracts, centralized auction or continuous auction, equal split of equities.
Legal documents: “State Council on the rectification of various types of trading platforms to effectively prevent financial risks ” ( No. 38), “the General Office of the State Council on the rectification of various types of trading venues” ( No.37) and so on.
4.Whether the exchange engaged in illegal financial business
Whether to carry out credit loaning or disguised loaning (with the business), futures, payment, exchange and other business without authorization.
Legal documents: Guidelines on abolishing illegal financial institutions and illegal financial business operations ( No. 247), the Act of Futures Transactions, the Guidelines for Non-financial Institutions engagement in payment service, the Act of Foreign Exchange Management.
5.The implementation of the anti-money laundering system
Including: the integrity of anti-money laundering system, the establishment of customer identity information and transaction record storage system and the establishment of large-amount transactions and suspicious transaction reporting system.
Legal documents: “Anti-Money Laundering Law of the People’s Republic of China”.
6. Customer funds management
Including: the balance of customer funds, the use of funds and the establishment of third-party custody system.
Legal documents: “The guidance on the promotion of the healthy development of Internet financial guidance”, which is issued by the People’s Bank and other 10 ministries ( No. 221) and so on.
7. Other items that need to be checked.
Article 8 Rectification proposals
Depends on the actual inspection results, rectification proposals include but not limited to: stop fiat loaning and Bitcoin loaning business, charge transaction fees, suspend bitcoin withdrawal service, establish a sound anti-money laundering system and conduct business in line with legal requirements.
Article 9 Rectification progress report
The rectification report includes but not limited to: the basic situation of the trading platform, issues found in the preliminary investigation, issues to be further identified, action plan for future rectification, rectification summary of exchanges within jurisdiction ( form attached).
Article 10 Guidance of public opinion
Proper guidance of public opinions must be handled during the process of rectification. Opinions could be released through the official website, media interviews, expert interpretation and other means. Initiatives shall be taken to release regulatory signals and guide the community expectations.