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Recently, Chinese regulatory authorities have issued strong regulatory signals one after another, and the price of Bitcoin has experienced the largest adjustment this year. After the Financial Committee meeting set the tone, Inner Mongolia quickly issued local regulations to crack down on virtual currency mining. The content is quite severe, forcing many mining machine manufacturers to "go overseas." In addition to the mining link, "freezing cards" are also becoming more and more frequent.
"Excuse me, is this a frozen card?" Hundreds of netizens have gathered in a rights protection group. Some have had their bank cards frozen, some have had their exchange accounts frozen, and some have had their positions liquidated due to the exchange outage on May 19. Recently, the group has been very "lively" with news every day.
"My Alipay account has also been frozen, so I'm done for." A friend in the group gave advice, "It's no use contacting the bank or the police station, just wait. It may take three days or half a year. If you contact them, they may ask you to go there in person to give a statement."
"I suggest you stop playing with XX exchange. My account has also been frozen. I only deposited money but didn't withdraw it, and they said my transaction was abnormal. I only deposited 150,000 but it was frozen the next day. The police station that froze my account is in Jinggangshan, Jiangxi. They called and said there was an abnormality in the transaction." This group member and this exchange are not the only ones whose accounts have been frozen. “Why are so many of our friends in XX having their accounts frozen and unable to withdraw or sell their coins?” At the end of May, dozens of people suddenly joined the rights protection group. After the group started the chain, 20 friends whose accounts were frozen quickly filled in their personal information and amounts: The group members whose accounts were frozen asked the exchange staff, and the answer they got was "your account was frozen by the police." They were told that they needed to ask customer service for the freezing documents, and the estimated waiting time for customer service consultation was more than 6 hours. There have been people whose accounts have been frozen by the police station before, and the account management rights are in the hands of the exchange. This is the first time they have heard of an account being frozen by a police station, and the group members also said they have never heard of it. In fact, several domestic virtual currency exchanges "went overseas" as early as the regulatory storm on September 4, 2017, and moved their servers overseas, but Chinese users can still trade on the exchanges through the Internet.
According to data from The Block Research, as of May 27, the supply of US dollar stablecoins exceeded $100 billion, with USDT accounting for about 62%, USDC accounting for about 20.42%, and BUSD accounting for about 8.89%. From the beginning of 2021 to April 30, the USDT on-chain transaction volume was $10,100. We don't know how much transaction volume Chinese users contributed, but some stablecoin transactions have become a convenient means of money laundering.
A person related to an exchange said that the main channel for money laundering using virtual currency is the "running point platform". The "running point platform" is attached to the entrance of the gambling platform or other APPs, aggregates the interfaces of third-party payment, cooperative banks and other service providers, uses rented bank cards and payment accounts to recharge gambling funds, uses flexible employment platforms to withdraw cash domestically, and uses underground banks and virtual stablecoins to withdraw cash across borders. Stablecoins have become the "new favorite" of these platforms.
On May 18, 2021, the Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China jointly issued the "Announcement on Preventing the Risk of Virtual Currency Transaction Speculation", which clearly cracked down on and restricted virtual currency trading and exchange business, and required financial institutions, payment institutions and other member units not to carry out virtual currency-related business.
On May 21, the Financial Committee of the State Council held a meeting and emphasized the need to crack down on Bitcoin mining and trading and resolutely prevent individual risks from spreading to the social field.
The use of virtual currency to commit crimes is becoming more frequent, and public security actions are also increasing. On May 12, 2021, the Hangzhou Xihu District People's Court tried the case of Zhao Dong, a well-known over-the-counter trader, suspected of illegal business operations and assisting information network criminal activities, which attracted attention from the industry. According to reports, the prosecutor explained the lawsuit in court mainly based on the fact that he only performed a simple KYC review of his name and ID number, and that the funds mainly came from transactions on fourth-party payment platforms that "run points" from overseas gambling platforms. He recommended a sentence of less than three years in prison and a fine.
A lawyer said, "Unwitting traders may have their cards frozen due to being involved in money laundering, and they may receive black money without knowing it." Due to the anonymity of virtual currencies, over-the-counter transactions have become a major disaster area for black and gray assets such as online gambling. It has previously become a key area of supervision for anti-money laundering by regulatory authorities, and the "frozen card" phenomenon has become even more serious recently.
An investor reported that he was unable to pay using WeChat Pay and his transaction function was restricted. WeChat Pay responded that "the current transaction is suspected of fraud risk." On May 19, some exchanges closed their over-the-counter trading sections after the three associations issued an announcement. An insider said, "The exchanges did not receive any notice from the regulatory authorities, and the closure of trading was a proactive risk avoidance measure."
How to “prevent freezing” has always been a difficult problem in the cryptocurrency industry. The entry threshold for OTC traders is not high. They use exchanges as their bases and make profits by collecting the difference between buying and selling USDT. This group of people has long been recognized as a group that “makes a fortune in silence” in the industry.
They are quite experienced in avoiding card freezing. When conducting over-the-counter transactions, merchants will specifically note that words such as digital currency, Bitcoin, and USDT are prohibited, otherwise the bank will detect it and freeze the card. In addition, most merchants only accept funds that have been deposited in the bank card for more than 3 days, and they will look at the bank flow in the past 3 to 5 days for video verification.
There are also many merchants who do large-volume transactions who choose to do transactions offline directly, and even use credit cards to collect payments. "They just empty their credit cards, and the payments they receive will be automatically repaid. It doesn't matter if the credit card is frozen, because they don't owe any money anyway."
Although there are many solutions to prevent frozen cards, no one can guarantee that they are foolproof. Many people who want to top up or withdraw money keep asking in the group, "Are there many frozen cards recently? Which one is not likely to be frozen?" Therefore, many off-site merchants promise "safety guarantee, compensation for frozen cards".
The level of China's regulatory stance this time is unprecedentedly high, but facing a decentralized new thing like virtual currency, the existing regulatory measures are inevitably powerless. Closing the mining farms may lead to more advanced chips in the future, and any equipment can be used for mining. Freezing credit cards is also difficult to completely prohibit individuals from transferring money to each other.
Virtual currency regulation is a global problem. Currently, the United States has not formed a unified regulatory framework for virtual currencies, and scattered proposals have emerged. For example, on May 20, the U.S. Treasury Department stated in a tax report that cryptocurrency transfers exceeding $10,000 must be reported to the IRS; on May 26, Gary Gensler said at a congressional hearing that cryptocurrency regulation requires that investors in cryptocurrency exchanges enjoy the same protection as on the New York Stock Exchange or Nasdaq platforms.
There are always many problems with new things. The growth of Bitcoin has been accompanied by regulatory games. Before the rules of this industry are improved, the "freezing card" storm may continue... (Rui Si Finance) |
