OKcoin and Huobi announced that they will only stop RMB trading this time

(Original title: Is this the fundamental reason why China stopped Bitcoin and other virtual currencies?)

According to China Business Network on September 21, 2017, in the face of the strict control of virtual currencies by regulatory authorities, the idea of ​​Bitcoin trading platforms going overseas may be just wishful thinking. According to reports, on the evening of the 15th of this month, the two major Bitcoin trading platforms in the mainland, OKcoin and Huobi, announced that they would only stop RMB trading business, and other businesses would not be affected. But then they adjusted the announcement and changed their words to stop all virtual currency trading business.

In this regard, a Beijing-based platform person said that the regulatory authorities will also intervene in the platform's overseas business to a certain extent, which is stricter than originally expected. The way of currency-to-currency trading is no longer feasible. Before, various platforms still had a fluke and thought that currency-to-currency trading was still possible.

Not only that, the person also said that under the current technical means, the overseas transaction channel of Bitcoin can indeed be blocked, that is, the blockchain ledger data of Bitcoin is discarded on the backbone routing equipment. This means that all Bitcoin transfer transactions in the mainland will not be confirmed at that time.

On September 18, the head of blockchain at a large Internet company also confirmed that all domestic operations of the Bitcoin trading platform will be terminated.

The head of a virtual currency trading platform said bluntly, "We originally intended to set up a new trading platform overseas, but at present, it is probably not feasible."

Kan Lei, Chief Strategy Officer of Industrial Blockchain Laboratory, said, "I was not very optimistic about domestic exchanges going overseas. Even if mainland users participate in transactions, they will go directly to mature foreign exchanges, and foreign exchanges only need to add Chinese versions. With such great interests involved, foreign exchanges will definitely do it, and they are more competitive than domestic exchanges."

Kan Lei also pointed out that even if we consider going overseas, if we focus on Chinese users, foreign exchange will become a big problem. If we face foreign users, it is actually more difficult because of cultural differences and high costs.

At present, foreign over-the-counter transactions can also convert virtual currencies into legal tender (RMB). However, most foreign exchanges are mainly based on currency-to-currency transactions (such as etherdelta, P-net, B-net, etc.), and some have currency-to-dollar trading markets in addition to currency-to-currency trading markets (P-net, B-net, bitfinex). Some continue to trade through over-the-counter trading platforms in Hong Kong that trade Bitcoin between individuals, such as Keying Cola.

Kan Lei pointed out that most of these transactions can be done through Alipay, but not WeChat Pay. There are also direct cash transactions. Because it is C2C, the funds do not even go through the trading platform, but are directly transferred between accounts. Therefore, it should not be possible to tell from the bank account that this is a Bitcoin transaction.

Is this the fundamental reason why Bitcoin was suspended in China?

Zerohedge, a well-known financial website in the United States, analyzed that now, buyers from China have become the decisive force in the global real estate market. Although China has taken severe measures to crack down on domestic capital outflows at the beginning of the year, it still continues to appear in the markets of certain countries, the most typical of which is the US market.

Dr. Joseph Wang, an expert from Hong Kong who specializes in Bitcoin trading and China's cross-border capital investment business, told the US media that Bitcoin is not very popular when it comes to circumventing China's capital controls, and using Bitcoin transactions to transfer funds out of China is the worst method.

He explained that Bitcoin transactions are very easy to track, which means that some people will abandon this method when transferring funds secretly. The use of Bitcoin transactions is to facilitate EB-5 visa holders to transfer funds to the United States, which may be the fundamental reason why Bitcoin in China was stopped.

For those who are not familiar with the visa policy, the EB-5 visa is a millionaire immigration investment program that allows immigrants to create jobs in the United States through a project with an investment of US$1 million, and they can obtain an immigrant visa in return.

He said that given China's capital controls that cap the amount at $50,000 per year, it would take the investors who received the visa 20 years to transfer $1 million from China to the United States.

However, Dr. Wang also said that the net impact of capital controls on Bitcoin is almost zero. Bitcoin has now become an anonymous, stateless currency in China. Russians are using Bitcoin in large quantities to transfer cash into China and then buy goods in the Chinese market.

Investors can cash out Bitcoin in other countries as this does not affect China's capital reserves.

Some economic researchers believe that as some emerging market countries have strengthened capital controls to reduce capital outflows, Americans may be using Bitcoin to circumvent these countries' capital controls so that capital can eventually flow out of these countries and into the United States.

China's regulatory authorities have already taken a lot of measures to deal with capital flight. Recently, the central bank announced that it is preparing to deploy a large-scale anti-money laundering action framework, the purpose of which is to further stop capital flight. The outside world is closely watching the effects of the central bank's measures.