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The People’s Bank of China has issued a notice restricting banks from handling Bitcoin.
“The Notice clarifies the status of Bitcoin,” read the statement. “Bitcoin is not issued by a monetary authority, it does not have the status of legal tender and obliged acceptance status of currency, it is not currency in the true sense. Bitcoin is a specified virtual commodity, it does not have equal legal status with currency, and it cannot and should not be circulated as currency on the market. But, the general public have the freedom to participate in Bitcoin trading as a commodity trading on the internet on the condition they carry their own risk.”
The notice further clarified that banks should not buy or sell Bitcoin, and any organization that operates in Bitcoin should pay special attention to Know Your Customer (KYC) requirements and other regulation that targets money laundering.
In the notice, Bitcoin was called a “virtual currency.” In 2009, the Chinese government first defined this term when it outlawed “gold farming,” the practice of selling currency from the popular game World of Warcraft for real money.
The implications of this notice are as follows:
- Bitcoin trading platforms are allowed to operate, as long as they comply with applicable laws
- Consumers can buy and sell Bitcoin
- Banks are not allowed to handle, buy, or sell Bitcoin. Therefore, financial institutions will not be able to purchase large volumes of the currency.
- This may ultimately slow down the trading volume growth we have seen in China if large financial institutions are prohibited, but should not cause a catastrophic effect to the currency’s value.
In response, the price of Bitcoin on the exchange BTCChina, and across the world, fell sharply then stabilized.
BTCChina 2-day price/volume chart from BitcoinCharts.com
Below is the full notice translated by Reddit user felix123.
In order to protect the public’s property rights, to protect RMB’s official currency status, to prevent money laundering risk and to protect financial stability, the People’s Bank of China, Ministry of Industry and Information Technology, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission jointly issued “The People’s Bank of China, Ministry of Industry and Information Technology, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission Notice on preventing Bitcoin risk” (2013 no.289, “Notice” hereinafter)
The Notice clarifies the status of Bitcoin. Bitcoin is not issued by a monetary authority, it does not have the status of legal tender and obliged acceptance status of currency, it is not currency in the true sense. Bitcoin is a specified virtual commodity, it does not have equal legal status with currency, and it cannot and should not be circulated as currency on the market. But, the general public have the freedom to participate in Bitcoin trading as a commodity trading on the internet on the condition they carry their own risk.
The Notice requires, at this stage, all financial institutions and payment institutions must not use Bitcoin to set price for product or services, not buy or sell Bitcoins, not act as a market maker for Bitcoins, not underwrite insurance related to Bitcoin or cover Bitcoin in insurance, not directly or indirectly provide other Bitcoin related services, including registering, trading, clearing or settlement; not accept Bitcoin or use Bitcoin as payment tool; not start a Bitcoin and RMB or foreign currency exchange; not start a Bitcoin saving, trust or mortgage service; not issue Bitcoin related financial services; not use Bitcoin as the investment in trusts or funds.
The Notice requires, that Bitcoin websites that act as the main trading platform, should follow the Telecommunications Act and the Regulation on Internet Information Service, and register according to law. Also, because Bitcoin has a higher risk of money laundering and being used by criminals, the Notice requires the relevant organizations to follow the requirements of the Anti-Money Laundering Act and fully comply with the legally required anti-money laundering procedures like KYC and suspicious transaction reporting, to prevent Bitocin related money laundering risks.
To prevent virtual goods like Bitcoin using the name of “virtual currency” to over-promote, damaging the public interest and the RMB’s position as legal tender, the Notice requires financial organizations and payment organizations in their daily tasks to use the correct concept of currency, to emphasize on public education about currency, and to add to public financial knowledge education the contents of correct knowledge of currency, correct views of virtual goods and virtual currency, rational investment, control of investment risk and defending one’s financial safety, in order the public have correct views on currency and investing.
In the future, the People’s Bank will do its duty and continue to closely monitor the Bitcoin trend and related risks.
Below is the Notice
People’s Bank of China
Ministry of Industry and Information Technology
China Banking Regulatory Commission
China Securities Regulatory Commission
China Insurance Regulatory Commission
Notice on preventing Bitcoin risk
Recently, a so-called Bitcoin calculated using certain computer programs gained widespread worldwide attention, there are also organizations and persons in China taking this opportunity to promote Bitcoin and related products. In order to protect the public’s property rights, to protect RMB’s official currency status, to prevent money laundering risk and to protect financial stability, according to the People’s Bank Act, the Anti-Money Laundering Act, the Commercial Bank Act, Telecommunications Regulations etc, the following notice is made:
1 Correct knowledge of Bitcoin
Bitcoin has four main characteristics: no central issuer, limited quantity, no geographical limits and anonymity. Although it is called currency, it is not issued by a monetary authority, it does not have the status of legal tender and obliged payment status of currency, it is not currency in the true sense. Bitcoin is a specified virtual commodity, it does not have equal legal status with currency, and it cannot and should not be circulated as currency on the market.
2 Financial institutions and payment institutions must not start Bitcoin related business
At this stage, all financial institutions and payment institutions must not use Bitcoin to set price for product or services, not buy or sell Bitcoins, not act as a market maker for Bitcoins, not underwrite insurance related to Bitcoin or cover Bitcoin in insurance, not directly or indirectly provide other Bitcoin related services, including registering, trading, clearing, settlement; not accept Bitcoin or use Bitcoin as payment tool; not start a Bitcoin and RMB or foreign currency exchange; not start a Bitcoin saving, trust or mortgage service; not issue Bitcoin related financial services; not use Bitcoin as the investment in trusts or funds.
3 Strengthening regulation of Bitcoin websites
According to the Telecommunications Act and the Regulation on Internet Information Service, websites that provide Bitcoin services like registration, trading etc should register with the telecommunications regulation authorities.
The telecommunications regulation authorities, following the determinations and punishment opinions of the relevant management authorities, should close down illegal Bitcoin sites according to law.
4 Prevent possible Bitcoin money laundering risk
Branches of the People’s Bank should closely monitor the trends and activities Bitcoin and other similar virtual commodities with the characteristics of anonymity and easy cross-border access, seriously consider its money laundering risk, research and implement targeted preventative measures. The branches should include lawfully established organizations that provide Bitcoin registration or exchange services in its area into its anti-money laundering monitoring, and supervise them to strengthen their anti-money laundering monitoring.
Bitcoin websites should earnestly carry out their anti-money laundering duty, confirm the identities of their users, have them register using their real names, and register their name and ID card number. If financial institutions, payment institutions or Bitcoin websites discover suspicious transactions involving Bitcoin or other virtual commodities, they should immediately report it to the China Anti-Money Laundering Monitoring and Analysis Center, and cooperate with the People’s Bank’s investigation; if they find evidence of fraud, gambling, money laundering using Bitcoins, they should report it to the police.
5 Strengthening public education on money knowledge and investment risk
Departments, financial organizations and payment organizations should in their daily tasks teach the public the correct concept of currency, to emphasize on public education about currency, and to add to public financial knowledge education the contents of correct knowledge of currency, correct views of virtual goods and virtual currency, rational investment, control of investment risk and defending one’s financial safety, in order the public have correct views on currency and investing.
Financial monitoring authorities can set implementation details according to this notice
Would the People’s Bank branches please distribute this Notice to financial organizations and payment organizations in their area. Any new situations or questions arising from this notice please report promptly to the People’s Bank.
Trends to watch and how to think about Bitcoin as a business
At the Inside Bitcoins NYC conference, Coinsetter CEO Jaron Lukasiewicz spoke to a packed crowd. His message: the current financial system is outdated and relies on critically dated infrastructure. He believes that “people involved in Bitcoin [are saying] this is not acceptable anymore.”
Exploring the current financial system he points to three to five fund transfer times under ACH payments and drawing experience from his previous startup in ticketing, companies paying over 40% of revenues out in credit card fees. Basically, in 2013, it is still exceptionally difficult to send money to a friend and this is leading to a customer revolution.
Today, he proposes, Bitcoin is the dominant virtual currency. Not simply in terms of transactions and value, but based on awareness – including awareness outside current users of the market. The first mover advantage is significant and Mr. Lukasiewicz asks us to spend time thinking about how it has the potential to become an “IP address for money.”
Coinsetter is a leveraged forex trading platform, focused on active traders. Originally he questioned the number of exchanges being set up at the moment and why there isn’t an original business model. On reflection he thinks this is actually important. The more liquidity that comes into the Bitcoin system, the better. It will draw more users; innovation and a greater focus on customers. The latter being a key concern for Mr. Lukasiewicz, there is “room for a lot more exchanges to come online, but it is important to focus on a particular customer.”
Bitcoin Companies Working with Government and Banks
Focusing on the themes that will lead to business opportunities, he has concerns about government regulation and how banks will interact with Bitcoin. One of his theories is that anonymous financial transfer systems will not be easily integrated into the current banking system. Know Your Customer concerns and regulations will be a significant hurdle, along with security for institutions with large holdings. When challenged on these points during Q&A, Mr. Lukasiewicz clarifies that he sees this as layers added on top of the current system, rather than a change to current Bitcoin protocols – apparently to the great relief of the audience.
In conclusion, he sees the best opportunities for those companies that firstly, concentrate on Bitcoin as a payments protocol, and secondly, have a strong focus on having a strong customer proposition and delivering an appealing experience.
Authored by Michael Smouha and Ronan Murphy, Contributors to On Bitcoin
Below is the company’s published statement on resuming withdrawals and improving banking.
Dear Mt. Gox Merchants, Mt. Gox is happy to announce that global account withdrawals have now fully resumed as of today, after several days of testing our new system for processing transactions. We want to keep you informed about our progress in this arena, and especially assure our customers that their funds are accessible.
Progress in the Previous Two Weeks
While we announced that there would be a temporary hiatus on withdrawals, during our testing over the past two weeks we managed to process over $1,000,000 USD to customers. As this required a great deal of manpower and was not a perfect solution, we are quite happy with the progress made despite the conditions.
New Banking Partners
Mt. Gox has now formed relationships with several new banking partners both in Japan and around the world, and we are still in the process of finalizing even more. This means that we will have increased stability and ability to transmit withdrawals going forward.
The new system is just now getting under way, so there is still a back-log of withdrawals that we need to process. Our team is working hard to increase transaction speeds, but there is approximately a two-week back-log we need to overcome. It will take a few weeks to get back to normal, and we thank you for your patience during this time.
We at Mt. Gox are proud to be one of the first advocates and entrepreneurs in this growing ecosystem, but much still needs to be accomplished to bring trust and stability to a mass market. In addition to our improved withdrawal system and new trading engine, we are very excited about the innovation happening across our industry and around the world. Despite the hiccups, these are exciting times and we are eternally grateful for your confidence and support along this bumpy road.
Bitcoin Exchange Mt.Gox Embraces US Banks with ABA Routing
Earlier this week, Bitcoin exchange Mt.Gox announced the support of ABA routing number based transfers designed to simplify withdrawals to US based accounts.
Mt.Gox users wishing to withdraw their funds to their US based bank account will now see along side the IBAN, SWIFT/BIC, a new ABA field where they will now be able to put their unique nine digit bank code identifying their branch.
Learn more at Mt.Gox.
Is Bitcoin Hype or Reality?
That’s the question on many minds as the value of 1 BTC soars from $47 to $147 in just two weeks.
The key question for speculators is where Bitcoin is along the Hype Cycle. Is it about to crash from the Peak of Inflated Expectations or powering through the Trough of Disillusionment?
The New Yorker posted a editorial about the growth of Bitcoin that explains some of the interest in Bitcoin.
In Cyprus, after the government made a run on personal bank accounts, Bitcoin grew dramatically.
The following Monday, the price of the decentralized electronic currency bitcoin rose from forty-five to fifty-five dollars on the major exchanges, and by Wednesday it had nipped up to sixty-five dollars. The financial media generally agreed that the two dramas are related.
The evidence coming out of Spain is circumstantial—a spike in Google searches for “bitcoin,” and another on mobile-app downloads of Bitcoin-related software were widely reported
This episode called out the salient lack of trust in financial institutions.
The weakness in existing currencies stems from lack of faith in institutions—particularly central banks.
This is not a new concept. Looking at writings by Bitcoin creator Satoshi Nakamoto shows that Bitcoin was devised as a system for removing the possibility of corruption from the issuance and exchange of currency.
But, eventually the government will take notice to the rapid growth of value in an alternate currency. More from The New Yorker:
As it happens, a few days ago, the Financial Crimes Enforcement Network (FinCEN), the federal agency that enforces laws against money laundering, announced new guidelines requiring certain “virtual currency” trading entities to register as Money Services Businesses (M.S.B.s).
But is this pragmatic?
Since mining yields pocket change for most, even if it were technically a violation of the way FinCEN sees the law, mining without registering would be like “laundering” a twenty-dollar bill by taking it to the grocery store and asking for two tens… it’s hardly worth the resources for anyone to care about it, no matter how illegal they decide it should be.
Bitcoin: Real But Trust Takes Time
Is Bitcoin hype? Bitcoin Foundation’s Chief Scientist Gavin Andresen clearly sees a great future ahead, and offers a few words of wisdom:
Until now, society has underutilized cryptography. If people accept it more broadly, cryptography can facilitate many things: the exchange of money, transparent elections, transparent government.
Trust takes time.