Chinese State News Agency Backs Tougher Regulation on Bitcoin Operators

The Chinese government’s news outlet, Xinhua News Agency, has today spoken out about dangers in the bitcoin space, backing the government’s recent outright ban on ICOs while calling for more stringent regulation of bitcoin exchange operators.

Calling for “iron fist” regulation, the agency said that cryptocurrency exchanges were becoming increasingly used by criminals and money launderers, highlighting that some exchanges were known to have “concocted pyramid schemes” or “engaged in illegal activities ... disguised as scientific and technological innovation.”

The news report praised Chinese authorities for their swift, decisive action in shutting down blockchain exchanges and banning ICOs, a decision that caused a number of Chinese exchange operators to voluntarily close their companies.

The report went further, advocating an ongoing “zero tolerance” approach to regulating the space, and tackling the financial risks of investing in bitcoin and other cryptocurrencies and tokens.

The agency, which many consider to be the mouthpiece of the Chinese state, said that in spite of measures to clamp down, there may still be some areas of the technology that are difficult to regulate, given the global nature of cryptocurrencies.

In proposing solutions, the agency said the government could investigate other measures and restrictions, including know-your-customer obligations, ID verification requirements, anti-money laundering measures and total caps on the amount of currency that can be moved through digital exchanges.

The report will be closely studied by analysts and investors in digital currencies, following the recent decision to implement an outright ban on ICOs in China.

The nascent fundraising method, which sees companies raise capital by issuing tokens on the blockchain, has attracted criticism from financial regulators across the world, with the Chinese decision to implement a ban resulting in a direct hit to bitcoin and other cryptocurrency prices.

While other regulators have acted with a more cautious approach, choosing to warn investors of the risks involved in ICOs, or introducing incremental additional regulations, the decision of authorities in China to simply ban ICOs has been interpreted in some quarters as overly restrictive.

However, if the statements emerging from Xinhua today are anything to go by, it could be only the beginning of an ongoing clampdown on blockchain tokens and cryptocurrencies in China, previously one of the biggest global markets for blockchain instruments.