The People’s Bank of China (PBOC) has proposed revisions to its anti-money laundering (AML) requirements for bitcoin exchanges, according to Zhou Xuedong, director of the National People’s Congress and the bank’s department of business administration, according to Finance New Media.
Despite recent actions with virtual currency exchanges, the central bank has not laid out any clear set of regulations upon the bitcoin industry in the country.
Xuedong has called for China to look at regulatory efforts toward bitcoin internationally to establish a regulatory mechanism for the industry.
KYC Requirements Needed
Under the rules established in 2013, there are no know your customer (KYC) requirements. There was a requirement concerning bit currency risk for trading platforms to identify users’ identities, including real name, registration name, identity card numbers and other information.
The proposed change includes two aspects regarding AML. One is to establish an AML structure to improve AML, anti-terrorism financing and an internal control system. Another is to clarify the platform’s obligations, including prevention and control measures. Such measures would include customer identity information, a system for preserving transaction records and a system for recording suspicious transactions.
Virtual platforms will need to have “on-site certification.” The trading platform will have to follow the KYC principle and establish a system for customer identification. When users of virtual currency make withdrawals and redemptions, they will be required to have a valid identity document. Customers applying for counterfeit goods, virtual goods and the equivalent of more than 50,000 yuan should provide remote video certification.
Customer ‘Presence Certification’
The customer for the first time would be required to have “presence certification.”
In addition to making detailed requests for customer identification, the proposal stipulates that the platform should develop senior management personnel responsible for AML and anti-terrorism financing, and establish specialized agencies and positions and an internal control system.
The platform should properly store customer identity information and transactions to ensure complete and accurate reproduction of each transaction.
The proposal also includes a list of suspicious transactions to focus on. Should a transaction involve criminal activities like money laundering, the platform should report it to the central bank business management department.
Xuedong said the whereabouts of funds can be learned from the blockchain technology.
On-Site Exchange Inpsections Begin
Since the beginning of January 2017, the People’s Bank of Beijing, Shanghai and other branches of the joint local financial regulatory authorities have carried out on-site inspections of exchanges that found the AML internal control system is not perfect.
On January 11, the Shanghai and Beijing branches of the PBOC conducted on-site checks of three bitcoin exchanges, sending prices crashing. Exchanges in the country began enforcing sweeping changes, beginning with halting leveraged or loan-based trading of the cryptocurrency between platforms a week after the PBOC became involved. On January 24, Chinese exchanges ended zero-fee trading and began charging a flat 0.2 percent fee of the value of the transaction.
The central bank continued its investigation of Chinese bitcoin exchanges in February. A closed door meeting with a number of domestic exchanges took place on February 8.
On February 9, a notice was issued to upgrade the AML system and that the standard development and implementation period was expected to be one month.
On March 8, a notice mentioned the need to address AML, foreign exchange management, payment settlement and other financial regulations.
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Last modified: March 4, 2021 4:55 PM