Expert: Seven Reasons Why Chinese Regulators Shut Down Bitcoin Exchanges


Lack of Licensing
The first point he made concerns licensing. He said that financial institutions are required to obtain licenses to carry out business such as by the China Banking Regulatory Commission and the China Insurance Regulatory Commission (CIRC). However, he noted that:At present, China’s domestic virtual currency trading platforms lack the relevant legal license, which leads to the virtual currency trading platforms free from the existing regulatory system. In fact, there is a huge business risk.
The Nature of Bitcoin

Money Laundering & Pyramid Schemes
The professor’s third point focused on how digital currency transactions can be used for money laundering and financial fraud, as well as to avoid foreign exchange controls. According to him:He then followed up with his next point, stating that some pyramid schemes and fraudulent activities leverage digital currencies.Because virtual currency has no borders, cross-border payments through virtual currency can avoid foreign exchange controls, and there is a greater need to guard against such anonymous transactions for countries and economies where capital projects are not fully open.
Market Manipulation & Security Concerns

Darknet Transactions
The Professor’s final point was about bitcoin being used in darknet markets, which have not been effectively regulated, he described before adding that:What do you think of Professor Yang’s explanations of why Chinese bitcoin exchanges are being shut down? Let us know in the comments section below.The darknet transactions are without strict protective measures, and will not strictly enforce anti-money laundering, KYC and other effective measures, and are even intended to allow anonymous transactions. The government can not effectively monitor the shortcomings of the darknet.
Images courtesy of Shutterstock and China Finance Online
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