https://docs.google.com/document/d/1sNYGpwj3EKkRhlejoycytZLq1OpFpl0bqOtCev0HexY/editThis is a translation of this Financial Times article explaining the Chinese government’s decision to close cryptocurrency exchanges. The translation was done in a hurry, thanks very much to @tianyuf for help translating and with edits! To be kept abreast of developments in the Chinese crypto world, you can follow me on Twitter at @ wheatpond
I’ve made some comments on various parts of the article which represent only my own take on the situation.
Original:
http://finance.caixin.com/2017-09-08/101142797.html 【财新网】(记者 彭骎骎 吴雨俭)监管当局决定关闭中国境内虚拟货币的交易所，这涉及 “OKcoin”、“火币网”和“比特币中国”等为代表的所有虚拟货币与法币之间的交易所，财新记者从接 近互联网金融风险专项整治工作领导小组(以下简称领导小组)人士处确认了这个消息，并了解 到目前该决议已经部署到地方。
Regulators have decided to close cryptocurrency exchanges operating in China, including OKCOIN, Huobi, BTC-C and other representative cryptocurrency exchanges that have fiat currency exchange functionality. A Financial Times reporter got in touch with someone at the Special Rectification on Risks in Internet Finance group(abbreviated as IFRG below) to confirm this news, and understand the effects of this decision.
9月8日，第三方交易平台国交网发布公告，宣布根据9月5日和9月8日北京市金融工作会议的 精神和要求，自当日17:30开始暂停所有币种的交易。
On September 8th, a third party exchange platform announced that in accordance with a request from the Beijing City Finance Meeting, trading on all pairs would be suspended at 5:30PM.
这是继9月4日人民银行等七部委联合公告(下称公告)后的进一步监管行动。前述公告将 ICO(Initial Coin Offering，首次公开售币)定位为“非法金融活动”，并限令在公告发布之日起， 禁止ICO新上项目，存量项目要限时清退。所有ICO代币交易平台都需要清理关闭交易。
This is a continuation of the People’s Bank of China “Council of 7” announcement that placed all ICOs into the category of “illegal fundraising activity,” effectively banning all new ICOs and requiring existing ICO projects to refund all collected cryptocurrency. All exchanges trading in ICO tokens were thereby required to halt trading immediately and issue refunds.
监管的目的并不限于现在60多家ICO代币交易平台，也将未从事ICO的若干家虚拟货币交易 平台纳入清理范围内，限时关闭。
The goals of regulation here is not limited to the 60 or so exchanges which trade in ICO tokens, but also extends to the exchanges which have never done any ICO trading, requiring them also to proceed with immediate settlement and close for a limited time.
“也就是说，未来在中国境内不能有所谓的虚拟货币和法币之间的交易平台。”该接近领导小 组人士表示:“这样，就不存在所谓代币、虚拟货币和人民币两两之间能不能交易的问题了。” That is to say, going forward China will not have any cryptocurrency exchanges that offer fiat currency to cryptocurrency exchange functionality. Someone close to the leadership of the IFRG explained: “this way there isn’t any issue of tokens or cryptocurrencies being able to be exchanged with RMB.”
监管部门对虚拟货币交易场所的调查并非突然来袭，而是在今年年初就已开始进行研究。目 前，领导小组已对此做出了判断和周密部署。
The regulators decision to investigate exchange platforms is not sudden; rather research into this issue was started at the beginning of this year. Currently, the leadership of the IFRG has already begun to make preparations to put the relevant regulation into effect.
中央七部委在9月4日联合发出的公告中，已对此发出信号:公告第三条“加强代币融资交易平 台的管理”指出，自公告发布之日起，任何所谓的代币融资交易平台不得从事法定货币与代币、 “虚拟货币”相互之间的兑换业务，不得买卖或作为中央对手方买卖代币或“虚拟货币”，不得为代币 或“虚拟货币”提供定价、信息中介等服务。
The PBC “Council of 7” announcement on September 7th signaled their intent to regulate exchanges in the 3rd point of the announcement: “strengthen regulation on exchanges and ICO platforms trading in tokens and cryptocurrencies.” After that announcement went into effect, platforms were no longer allowed to have fiat/cryptocurrency trading, cryptocurrency to cryptocurrency trading, were not allowed to sell, buy, or act as an escrow middleman for cryptocurrency transactions, not allowed to set prices for cryptocurrencies, and finally not allowed even to provide information clearinghouse services etc.
需要注意的是，这次决定关闭的是虚拟货币与法币之间的交易平台，即只是禁止在中国境内 的虚拟货币场内交易，并非禁止所有虚拟货币与法币在中国境内的交易。“要关闭的就是比特币交 易所，不是针对比特币。”前述接近领导小组人士强调，取缔和比特币交易所相关的活动并不影响 区块链技术的发展。
It’s important to note, this decision is to close all cryptocurrency to fiat currency exchanges, that is, to halt all exchanged based trading of bitcoin for RMB. But it does not halt all bitcoin and fiat trading outside of exchanges. Someone close to the leadership of the IFRG stated: “what is being closed is bitcoin exchanges, not bitcoin itself”. The same person emphasized, “this ban on exchanges and exchange activity won’t affect the development of blockchain technology.”
据该位接近领导小组人士透露，从防风险的角度，让虚拟货币与法币的场内交易活动退出中 国，主要有市场风险、金融风险和社会风险三个层面的考虑。
As revealed by our source close to the IFRG leadership, from a risk prevention standpoint, the decision to force crypto-to-fiat exchange activity out of China was made out of consideration for market risk, financial risk, and risk to society at large.
二级市场的扭曲效应
Manipulation effects on secondary markets 自2013年以来，监管当局就对虚拟货币的二级市场的扭曲效应感到风险巨大。当时比特币在 中国境内的交易量，超过了全球交易量的九成，并把比特币推向了8000元的历史高点。个别交易 所做庄、放杠杆甚至监守自盗的做法有所暴露。五部门联合发布了289号文，比特币价格应声而 落。
Since 2013, regulators have felt that the manipulation potential on secondary markets presented a huge risk. At that time the volume of bitcoin trading in China was 9 times larger than the rest of the world’s volume combined, bringing BTC’s value to a historic high of 8000 RMB (~1200$). It was revealed that several exchanges acted as market manipulators, using leveraged products and even directly embezzled funds. <group of 5> ‘s “#289 announcement” caused the price of BTC to tumble.
没想到，进入2017年后，比特币卷土重来，不但重新登上8000元历史高点，更一再刷新纪录 ，在2017年7月最高达到每枚3万元，一时号称目标5万元。据财新记者了解，监管当局对此深感 风险巨大，早在今年上半年已酝酿相关监管措施。没想到随后ICO来得这么猛，比比特币涨幅更 凶的是对标比特币、以太坊的各类代币，这首先触发了针对代币发行和交易的强监管。
What no one saw coming was that in 2017, Bitcoin would make a huge comeback, not only going back to it’s historic high of 8000 RMB but setting a new record in July of 30,000 RMB, with a new price target of 50,000. According to a Financial Times reporter’s understanding, regulators felt this presented an enormous risk, and earlier this year began formulating relevant regulations. No one expected that after the ICO craze began, ICO tokens which were exchanged for BTC or ETH would grow even faster than BTC itself, which brought on a spate of strong regulation aimed at ICOs.
据国家互联网金融安全技术专家委员会发布的《7月份国内比特币交易情况监测报告》， 2017年7月，国内比特币交易成交额为301.7亿元，环比下降11.6%。从全球范围来看，占全球总 交易量的30%。自交易所开始收取交易手续费以来，2-4月份国内比特币成交额有所下降。随着交 易价格快速上涨，4月份以来比特币成交额呈持续攀升态势。
According to the “Natioanl internet finance technology experts council”’s report <Report on Bitcoin Exchange monitoring>, in July 2017 Chinese bitcoin exchanges had 30.17 billion RMB in trading volume,环比下降11.6% , representing 30% of the global volume. After exchanges began collecting fees, the trading volume decreased in february-april. Following the increase in trading costs, after April the trading volume continued to increase.
从市场风险的角度来看，监管部门经过研究认为，虚拟货币的交易场所，包括其二级市场的 风险相当大。“看不清楚这些价值基础是什么，所谓的价值是对技术的想象空间，没有任何合格的 投资性标准。”这种“价值”跟实体经济没有任何关系，因此在价格迅速攀升的二级市场，一旦价格 下跌，普通投资人承受的损失非常大。今年上半年，监管当局曾发声提醒这一市场风险。
From a market risk perspective, after doing some research regulators felt that the risk presented by virtual currency exchanges was extremely large. “We can’t see any basis for these prices,
the value comes from the supposed potential of the technology, there’s no acceptable standard or basis for investment.” This kind of “value” has no basis in real economy, so during this period of massive gains on secondary markets, the moment the prices begin to fall, retail investors face extremely large potential losses. Early this year, regulators issued a statement warning of this risk.
涉嫌违法证券活动
Suspected illegal securities activity 监管部门认为虚拟货币的投资活动为非法集资等各类非法金融活动提供了温床，易造成更大 的金融风险。因为普通投资者无法辨别比特币和莱特币的异同，更无法辨识其与各类伪虚拟货币 的区别。而大量关于“币”的非法集资活动都来自于对比特币的狂热，包括对比特币交易场所的狂 热。“整个比特币市场的火热是所有的疯狂的‘币’的市场以及违法活动乱象的根源之一，ICO的疯狂 也源自比特币的疯狂。比特币交易场所的乱象和比特币的火爆，引发了以比特币为支持的非法金 融活动，包括传销、诈骗等问题。”
Regulators believe that virtual currency investment activities (eg ICOs) are hotbeds of “illegal fundraising” and other such illegal financial activies, which can easily create even larger financial risk. Since average retail investors can’t tell the difference between Litecoin and Bitcoin, they certainly can’t tell the difference between all the different cryptotokens currently on the market. Much of the excitement around token investing comes from the massive hype around Bitcoin itself, and around Bitcoin exchanges. “The hype around token investing, and the illegal fundraising activities therein, comes from (among other places) the hype around Bitcoin. The ICO craze has the same origin. The craziness around Bitcoin exchanges and the explosive growth of Bitcoin created an opportunity for illegal fundraising with Bitcoin, multilevel marketing schemes, and scam problems.
前述接近领导小组人士透露，在今年上半年监管部门组织了对部分交易所的进场检查，随后 国内的交易量便下降了90%。 “其实是因为存在非常多的虚假交易，有些既做交易平台又是交易 方，这样的场所如何保证投资者利益?” 该人士表示，尽管监管在今年年初进场检查时，对交易 所做出了实名制、反洗钱等要求，但目前大量的交易所都未能落实。
The previously mentioned source close to leadership revealed, when regulators investigated some exchanges earlier this year, the Chinese trading volume dropped 90%. “Actually, this is because there was a huge amount of fake trading, because there were some people who both acted as exchanges, and traders on their own exchanges, so how could such an institution protect the interests of investors?” This source explained that during the investigations earlier this year, regulators asked exchanges to begin proper KYC and anti money-laundering policies, but currently many exchanges have failed to implement these policies.
“有些平台为了使市场看着很红火，开展融资融币、杠杆交易、开办类期货、还有拆分买卖虚 拟货币的行为。现在花100块买比特币，买到的只是一枚比特币的极小一部分，其实就是对币的 权益做了拆分，也就意味着这种拆分的情况下已经构成类证券。而拆分其实就是方便炒作，本质 上属于违法证券活动。”
“Some exchanges, in order to make the market look hot, activated financial products including leveraged trading, futures, and split selling of cryptocurrencies. Now if you spend 100 rmb to buy BTC, you are only buying a tiny portion of a BTC, which is actually splitting the stake, and this type of split essentially represents a security-like structure. Also this kind of splitting makes it easier to manipulate, which is in essence illegal securitization.
该接近领导小组人士指出，需要划清三个概念，即区块链、比特币和比特币交易所。“比特币 不能和区块链划等号;比特币不能和比特币交易场所划等号;比特币交易场所和区块链技术也没 有半点关系。”他表示，虚拟货币交易场，本质上只是个提供撮合交易的场所，有些虚拟货币交易 所甚至有融资融币功能，“跟一般金融交易所没有不同”。
This same source explained，it’s important to clearly separate three concepts: blockchain, bitcoin, and bitcoin exchanges. Bitcoin shouldn’t be used as a synonym for blockchain; bitcoin shouldn’t be used as a synonym for bitcoin exchanges; blockchain technology and bitcoin exchanges are two absolutely unconnected concepts. He stated: virtual currency exchanges in essence are providing order matching and exchange functionality. Some exchanges even provided financial products and leverage tools, “no different from your standard financial exchanges.”
警惕社会风险
Watching out for societal risk 除此之外，监管部门认为，比特币为代表的虚拟货币日益成为各类违法犯罪活动的“帮凶”， 为洗钱、恐怖融资等活动提供便利，在金融体系之外还容易造成很大的社会风险。例如，比特币 已经成为暗网交易的重要基石，犯罪分子通过比特币在暗网售卖毒品和违禁品，每年可获利约1亿 美元。
Besides the aforementioned issues, regulators believe Bitcoin (as a representative cryptocurrency) increasingly is becoming an accomplice to all sorts of criminal activity. It makes money laundering, funding for terrorism and other criminal activities convenient, and this fundraising channel outside the traditional financial system has created an enormous risk to societal stabilty. For example, Bitcoin has become the foundation of the Dark Web, where criminals can use bitcoin to sell drugs and other illegal products, making over 100 million USD yearly. 监管部门发现，近年来全国多份重点可疑交易报告涉及虚拟货币交易，虚拟货币已经成为不 法分子实施诈骗、非法集资、网络传销等违法犯罪活动的重要标的物和非法资金流转载体。而比 特币发明的初衷之一就是躲避监管，其匿名性和全球性的特征使其纳入监管体系极为困难，如果 任由其发展，就会对打击地下经济等违法犯罪问题造成困难，虚拟货币交易所的存在极大地方便 了不法分子获得及转移虚拟货币。
The regulators discovered that multiple reports of suspicious transactions across the country over the years are related to cryptocurrency transactions, and cryptocurrencies have become the financial medium of frauds, illegal fundraising, online pyramid selling, and other criminal activities. The initial purpose of bitcoin’s creation was to avoid regulations, and its anonymity and globally-accessible attributes have made it extremely difficult to fit in the current regulatory system. If the authorities allow cryptocurrencies to continue to develop without supervision, it would be difficult to crack down underground financial crimes, as the presence of
cryptocurrency exchanges had been assisting criminals to obtain and transfer cryptocurrency assets. 上述接近领导小组人士表示，虚拟货币交易场所并没有对技术发展有任何益处，与此同时其 存在还有利于不法分子获得虚拟货币并利用虚拟货币难以追踪的特征开展非法金融活动和违法犯 罪活动，因此，监管部门决定将其关闭。
The source suggested that cryptocurrency exchanges are not at all beneficial for the development of technologies. Meanwhile, since cryptocurrency transactions are often untraceable, there are people who use cryptocurrencies to engage in illegal financial activities and commit crimes. Therefore, the regulators have decided to shut down these exchanges. “现在调子是严控金融风险，但比特币交易所的存在对实体经济有什么好处呢?我们看不 到。”该接近领导小组人士表示。
“The current priority is to strictly control the financial risks, but will the presence of Bitcoin exchanges bring any benefit to China’s real economy? For now, we can hardly see any.” 此前市场曾讨论是否应该对虚拟货币场内交易“开正门”，包括设置投资者门槛或进行“沙盒监 管”。上述接近领导小组人士表示，设置投资者门槛可能会减少市场风险，但无法避免金融风险和 社会风险。如果一旦认可虚拟货币交易平台，就不可避免为之背书。“比特币的市场风险、金融风 险和社会风险，都是不可控的。
Previously, the market discussed whether China should publicly legalize transactions on cryptocurrency exchanges, by setting thresholds for qualified investors or establishing regulatory sandboxes. The aforementioned source indicated that these regulations may reduce the risks of the market, but will not avoid the risks that are threatening the financial and societal stability. If China recognizes the legality of cryptocurrency exchanges, [the authority] will eventually have to endorse these exchanges. “The market, financial, and societal risks will be out of control.” 目前，国内交易量最大的三大虚拟货币交平台为OKCoin(占比22.5%)、比特币中国(占比 19.7%)和火币网(占比18.2%)，三者合计占比达60%。由于中国监管当局一直在帐户实名 制、禁止加杠杆、反洗钱等角度落实对相关交易所的限制，目前比特币在中国境内交易量占全球 的占比，已经从2013年的九成下降到目前不到三成。
Today, the top 3 Chinese cryptocurrency exchanges are OKCoin (22.5% of global trading volume), BTCC (19.7%), and Huobi (18.2%), which altogether occupy 60% of the total trading volume globally. Due to the strict regulations of the Chinese authority that were imposed upon local exchanges, which required users to verify their IDs, banned leveraging and eliminated money laundering, the ratio of China’s domestic trading volume of Bitcoin has dropped to 30% from 90% back in 2013.
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