“A brutal reshuffle in the short term by tough government action” is how local media describe a new rule of the Chinese Central Bank, the People’s Bank of China (PBoC).
Ban on the sale of telephone cards and bank cards
They are now banning the sale of telephone cards and bank cards, blocking another route for over-the-counter (OTC) trading. This applies especially to those on the blacklist.
The central bank announced on 18 September a blacklist of 1091 OTC trading accounts. These accounts are required to be suspended for three years and online transactions banned for five years.
Over-the-counter (OTC) trading is becoming difficult.
In China, many payments are made via WeChat Pay or AliPay, which requires a telephone number. The ban on selling telephone cards therefore makes OTC trading even more difficult. Industry insiders say that banks’ new rules aim to make it more difficult to buy and sell bitcoins, despite the official view that this has to do with anti-money laundering measures.
Peer to peer and companies
Peer-to-peer trading is more difficult to detect than trading via an exchange. But when people send and receive from many different accounts on a daily basis, it is noticeable. This is different for companies, where it is normal for them to receive and send a lot of transactions. The system is now designed in such a way that commercial banks send a warning to the central bank if an individual has many transactions. The central bank then opens an investigation and maintains a blacklist.
Directly to the central bank
In the West, suspicious activities go to federal enforcement agencies, which are ultimately accountable to, for example, the Ministry of Finance. In China, therefore, these reports go to the central bank, which is not accountable to anyone.
In China, however, the central bank has more power than in other countries. They have the authority to close accounts and bar individuals from exercising monetary functions without recourse to an independent judiciary.
Last month, for example, a USDT OTC trader from OKex was investigated because he had allegedly received money from a scam in which it was unclear what happened next.
Unofficial ban on bitcoin
Yet there is no official law in China banning the trade in bitcoin. However, the central bank is in a position to ban the free exchange of funds when they relate to cryptos. As a result, a kind of ban has been created in practice without a word in their parliament or in their judiciary.