Bitcoin Exchanges “Illegal” in China

Chinese based bitcoin and cryptocurrency exchanges are closing following an official prohibition in China which considers them “illegal”. Already BTCChina, ViaBTC, OKCoin, Huobi and Yunbi have announced a “stop trading” cessation of their exchange operations within mainland China. The effective closure dates vary with the exchange.

The terminal closure of Chinese bitcoin exchanges started on September 15 2017 with BTCChina announcing it would completely shut down its exchange business:

BTCChina Website “Stop Trading”

Notably the closure does not apply to the BTCChina domestic bitcoin mining pool, and did NOT apply to its international holdings such as “BTCC Pool, BTCC USD Exchange, BTCC DAX, BTCC Mobi, & BTCC Mint”:

BTCC is not closing because the legal entity operates under a different jurisdiction than BTCChina. According to the BTCC.com website the jurisdiction for BTCC.com is “BTCC UK Limited, Wisteria Grange Barn, Pikes End, Pinner, London, HA5 2EX, England, U.K.”:

BTCC.com Website Copyright
Tap or click to enlarge:

The Chinese government exercises control only over domestic affairs. This frees Chinese exchanges which are legally incorporated outside of China from Chinese authority and law.

The move came after Chinese authorities announced the introduction of regulatory measures for initial coin offerings (ICO’s). The official notice was titled “Public Notice of the PBC, CAC, MIIT, SAIC, CBRC, CSRC and CIRC on Preventing Risks of Fundraising through Coin Offering” and the web address is http://www.pbc.gov.cn/english/130721/3377816/index.html

The public notice effectively bans all cryptocurrency trading within China:

I. The Essential Attributes of Fundraising Through Coin Offering

Financing through coin offerings refer to financing bodies raising virtual currencies such as Bitcoin or Ethereum from investors through illegal sales and circulation of crypto currency or tokens. Such offerings, in essence, are unauthorized and illegal public fundraising and are suspected of involving in criminal activities such as illegal selling of tokens, illegal issuance of securities, illegal fundraising, financial fraud and pyramid schemes. The competent authorities will closely monitor the related developments, strengthen coordination with the judicial departments and local governments, strictly enforce the law and work based on the current mechanism, and resolutely clamp down on market irregularities. Any suspected crimes, once identified, will be transferred to judicial department.

The token or “virtual currency” used in coin offerings are not issued by the monetary authority. Such currency does not have characteristics of money such as legal tender status and mandatory use, has no legal status equivalent to money, and cannot be circulated or used as currency in the market.

The Chinese prohibition follows a United States Securities and Exchange Commission Investigative Report which arbitrarily deemed the DAO ICO as a security, and thus potentially placed all ICO’s under its authority. This followed the failure of the DAO token which garnered a record 150 million investor dollars – and then failed. The token was based on Ethereum.

Shortly after the BTCC announcement ViaBTC announced on September 15 2017 that it would shut down their exchange platform:

They also indicated their cloud mining and mining pool operations were not unaffected.

Many bitcoin exchanges are either located in or started from Chinese territory. These include OKCoin (Hong Kong S.A.R.), Huobi, BTCChina (with UK based offshoot BTCC), ANX International, Bter (British Virgin Islands), ViaBTC and others.

OKCoin and Huobi are closing:

OKCoin: https://www.okcoin.cn/t-2510731.html

Huobi: https://www.huobi.com/p/content/notice/getNotice?id=641

Since OKCoin operates out of Hong Kong Special Administrative Region (S.A.R.) it appears that mainland Chinese policy applies equally to entities within a Special Administrative Region.

Yunbi has announced it will close:

The Chinese bitcoin exchanges which moved some or all of their operations to foreign countries continue trading unabated. Those with operations wholly or in part within China must move jurisdiction or close.

The all time market share of Chinese bitcoin exchanges is dominating. According to Bitcoinity.org the Chinese exchanges account for about eighty eight (88.35%) percent of all bitcoin ever traded:

All Time Market Share by Exchange

In the last month Chinese bitcoin exchanges traded about 21% of all bitcoin.