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BitForex Reopens Withdrawals Following Detention of Team in China

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BitForex, a cryptocurrency exchange, has announced the reopening of its platform for asset withdrawals after a tumultuous period marked by the detention of its team in Jiangsu Province, China. This incident, which occurred on February 23, 2024, led to an unexpected halt in platform operations and withdrawals. On that day, approximately $56.5 million was reported to have been withdrawn from BitForex’s hot wallet, prompting the immediate suspension of withdrawal services.

The exchange communicated the situation through an official announcement, expressing regret over the inconvenience and uncertainty faced by its users. The unexpected nature of the detention prevented BitForex from issuing timely notifications, leaving many users in the dark about the status of their assets.

Efforts to resolve the situation have been ongoing, and BitForex has now received clearance to reopen specifically for withdrawals. The exchange will undergo significant operational changes during this period. Trading functions will be suspended, halting all buy and sell activities.

Additionally, new user registrations will be temporarily paused, and deposits into platform accounts will be unavailable. BitForex has emphasized that this phase is crucial for comprehensive rectification, aiming to restore trust and security for its user base.

BitForex Withdrawal Process and KYC

Users will be permitted to withdraw their assets to designated wallets, but those holding perpetual contract positions will need to complete Know Your Customer (KYC) verification. This process requires users to submit identification documents such as a passport and phone number, ensuring compliance with regulatory standards.

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BitForex has acknowledged the distress caused by the incident and is prioritizing the safety of user assets. The exchange’s customer service team is available for inquiries and support, with users encouraged to reach out via the official email channel for assistance.

The reopening of withdrawals marks a significant step toward stabilizing BitForex’s operations and rebuilding user confidence. The exchange has extended apologies and gratitude to its community, emphasizing a commitment to transparency and security in the future.

However, it brings to light all the complexities and risks that the industry of cryptocurrency holds, especially for the regions which have strict regulatory environments. Another change the exchange looks to bring in further will be complete restoration of services while maintaining user trust through improved security features and clarity in communication.

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Bybit Expands Boldly: Services Now Available in China

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In a surprising move, the cryptocurrency exchange Bybit has seemingly extended its services to users in the People’s Republic of China, a jurisdiction that was previously off-limits. This development was brought to light by Wu Blockchain, a social media-based news outlet, which reported that the exchange now allows Chinese users to register and authenticate their accounts on the platform. Users can utilize various forms of identification, including their ID cards, passports, driver’s licenses, or resident permits, to fulfill the know-your-customer (KYC) requirements.

This revelation comes amid ongoing scrutiny of cryptocurrency exchanges and their adherence to regional regulations. As of June 5, China was notably absent from Bybit’s list of excluded jurisdictions. The list, detailed in the exchange’s terms of service, continues to bar users from countries such as the United States, the United Kingdom, Hong Kong, Singapore, Canada, North Korea, Cuba, Iran, Uzbekistan, and Russian-controlled regions of Ukraine, among others. The inclusion of mainland China in the exchange’s operational reach marks a significant shift in the exchange’s regional strategy.

SFC’s Stance Alters Bybit’s Hong Kong Plans

Earlier this year, Bybit made headlines when it applied to operate as a virtual asset trading platform in Hong Kong through its local entity, Spark Fintech Limited. However, this application was subsequently withdrawn. The decision to retract the application came in the wake of the Hong Kong Securities and Futures Commission’s (SFC) statement in early June. The SFC explicitly stated that it would not permit firms to provide services to Hong Kong residents if those firms also catered to customers in mainland China.

The potential entry of Bybit into the Chinese market raises several questions, especially given China’s stringent regulations on cryptocurrency activities. It remains to be seen how Bybit will navigate these regulatory waters and what implications this move will have for its global operations.

Despite reaching out for confirmation, The Block has yet to receive a response from Bybit regarding these developments. As the situation unfolds, the cryptocurrency community will be closely watching how Bybit’s strategic decisions influence the broader market and regulatory environment.

For now, Bybit’s expansion into China signals a bold step into one of the world’s most tightly controlled digital currency landscapes, potentially setting the stage for significant shifts in the global crypto exchange landscape.

USDT Smuggling Scheme: $1.9B Uncovered, Massive 193 Arrests in China

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USDT was a key focus during the 15th “May 15” Publicity Day for Combating and Preventing Economic Crimes, which highlighted a significant breakthrough against economic malfeasance. The Sichuan and Chongqing Public Security Economic Investigation Departments revealed their latest successful operation at the Chengdu Tianfu International Financial Center, showcasing efforts to dismantle a vast underground banking network.

At the forefront of the event, the Chengdu Public Security Bureau disclosed two landmark cases of economic crimes. One involved an enormous underground bank case, with transactions amounting to 13.8 billion yuan. The suspects utilized USDT, a stablecoin pegged to the US dollar, to circumvent national foreign exchange regulations and facilitate illegal foreign exchange settlements. This case spanned 26 provinces, leading to the arrest of 193 suspects nationwide.

USDT Key in Major 2023 Bank Dismantling Effort

In 2023, spearheaded by the Economic Investigation Bureau of the Ministry of Public Security and the Sichuan Provincial Public Security Department, with critical support from the Anti-Money Laundering Division of the Sichuan Branch of the People’s Bank of China and the State Administration of Foreign Exchange, a comprehensive joint task force was formed. This collaboration included the Economic Investigation Detachment and the Longquanyi District Branch of the Chengdu Public Security Bureau. The task force dismantled two major underground bank dens in Fujian and Hunan, with assets totaling 13.8 billion yuan frozen and 149 million yuan seized.

Zhong Yu, captain of the Eighth Brigade of the Economic Investigation Detachment, reported that the operation began in November 2022 when the Longquanyi District Branch identified suspicious fund settlements through underground banks. By June 1, 2023, the task force had apprehended 25 suspects across multiple cities, seizing numerous bank cards and other payment instruments.

The investigation unveiled that since January 2021, a criminal gang led by individuals surnamed Lin, Weng, and Chen exploited USDT to provide illegal foreign exchange services. These activities supported various criminal enterprises, including drug smuggling, illegal asset purchases, and fraudulent tax refunds. The use of USDT allowed the gang to bypass national foreign exchange controls, posing significant risks to financial security.

In August 2023, leveraging the case’s broader criminal network, the Ministry of Public Security orchestrated a nationwide crackdown, arresting an additional 168 suspects across 26 provinces. This operation marked a significant triumph in Sichuan Province’s ongoing campaign against underground banking crimes.

As the case progresses, it underscores the critical need for vigilant financial regulation and the persistent threat posed by digital currencies like USDT in facilitating economic crimes.

China’s CBDC Faces Hesitancy Among Users, Privacy Concerns Loom

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China’s ambitious venture into the realm of Central Bank Digital Currency (CBDC) is facing hurdles as reports emerge of hesitancy among participants in the pilot program. The state-backed digital yuan, often referred to as e-CNY, is encountering resistance from users who are reluctant to hold onto it, citing various concerns regarding its utility and privacy.

Recent findings indicate that despite efforts to promote the digital yuan, including its adoption as a form of salary payment for state workers in certain cities, many recipients are opting to convert it into physical cash immediately. Sammy Lin, an account manager at a Chinese state bank in Suzhou, exemplifies this sentiment, expressing his preference not to keep funds in the e-CNY app due to the absence of interest and limited spending options.

Similarly, Andrew Wang, a civil servant, acknowledges the digital currency but notes its insignificance in his overall salary. However, his wife, who receives her entire salary in digital yuan, promptly converts it to cash, citing the lack of functionality associated with the e-CNY wallet.

CBDC Privacy Challenges Acknowledged

The reluctance to embrace the digital yuan extends beyond concerns of convenience and financial incentives. Chinese citizens remain apprehensive about the broader implications of transitioning to a cashless society, fearing increased surveillance and the erosion of privacy. Ye Dongyan, a researcher at Beijing’s Cheung Kong Graduate School of Business, emphasizes the need to strike a balance between privacy and security in the implementation of the digital yuan.

Yi Gang, the former governor of the People’s Bank of China, acknowledges the privacy challenges inherent in the CBDC initiative but assures users of “controllable anonymity,” which purportedly safeguards privacy while allowing for traceability in larger transactions.

Despite these assurances, skepticism persists, with participants urging policymakers to address privacy concerns more comprehensively. The journey towards widespread adoption of the digital yuan necessitates not only technological advancements but also robust safeguards to protect user privacy and engender trust in the burgeoning digital financial landscape. As China continues its push towards a cashless future, the resolution of these challenges will be pivotal in shaping the success of its CBDC initiative.

Hong Kong Bitcoin ETF Approval Sparks $25 Billion Surge in Demand from China

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Hong Kong, an economic powe­rhouse and gateway for Chinese­ investments abroad, is poised to surge­ in Bitcoin (BTC) demand if a spot Bitcoin exchange-trade­d fund (ETF) receives approval. This de­velopment could unleash a massive­ $25 billion inflow from mainland China, facilitated by the Southbound Stock Connect program.

The­ Southbound Stock Connect program bridges the gap for qualifie­d mainland Chinese investors, allowing the­m to access eligible share­s listed on the Hong Kong Stock Exchange. Matrixport, a crypto se­rvices provider based in Singapore­, highlights the program’s ability to facilitate “up to 500 billion RMB (HK$540 billion and $70 billion) in annual transactions.

While the­ exact figure remains an e­stimate, Matrixport presents a “blue­ sky” scenario. This scenario assumes that the­ average unused quota from the­ Southbound Stock Connect program over the past thre­e years would be dire­cted into the spot ETF. This optimistic outlook translates to a pote­ntial $25 billion windfall for Hong Kong Bitcoin ETFs, expressed in Hong Kong dollars as HK$200 billion.

$15-25 Billion Await Bitcoin ETF Investments in Hong Kong

360MarketIQ reports reve­als that the Southbound Stock Connect program has an annual quota allowing mainland Chinese­ investors to purchase Hong Kong stocks worth HK$540 billion. Howeve­r, the actual utilization over the past thre­e years fell short, re­aching only HK$450 billion, HK$400 billion, and HK$320 billion, respectively. This le­aves an untapped quota ranging from HK$100 billion to HK$200 billion ($15 billion to $25 billion) annually.

Matrixport clarifies that pote­ntially HK$100 billion to HK$200 billion remains available for Bitcoin ETF investme­nts if approval comes without restrictions. This unutilized capacity offe­rs a remarkable opportunity for Bitcoin investme­nt through the proposed Hong Kong ETF.

The pote­ntial Bitcoin ETF approval aligns with China’s growing interest in diversifying its financial landscape­, especially as the tightly controlle­d renminbi has weakene­d nearly 2% against the U.S. dollar over the­ past two years. This concerning trend is drive­n by economic slowdown and a shrinking trade surplus.

China’s RMB is at a 17-year low ve­rsus the USD. Matrixport notes a demand for dive­rsification, emphasizing the Chinese­ central bank’s recent surge­ in gold purchases. This highlights China’s strategic shift towards alternative­ assets, and Bitcoin appears poised to be­nefit significantly.

Mainland Funds Eager to Participate

The chance of a Bitcoin e­xchange-traded fund (ETF) listed in Hong Kong is attracting significant inte­rest from mainland China. Nick Ruck, Chief Operating Office­r of ContentFi Labs based in Hong Kong, said:

“Mainland-based funds have been applying to issue spot bitcoin ETFs through their Hong Kong subsidiaries. If approved, this could allow qualified mainland investors greater access to bitcoin.”

Reports from Nikke­i Asia confirm this trend, revealing applications from promine­nt firms like Harvest Global Investme­nts (the Hong Kong arm of Bosera Asset Manage­ment) and Value Partners (owne­d by Chinese brokerage­ GF Holdings), highlight the eage­rness of mainland Chinese institutions to participate­ in the potential Bitcoin investme­nt opportunities.

With the Unite­d States granting approval to approximately a dozen spot Bitcoin ETFs four months ago, the­ trajectory for a comparable endorse­ment in Hong Kong appears increasingly e­vident. The remarkable­ achievement of U.S. ETFs, amassing an astounding $12 billion in inve­stor funds and propelling Bitcoin to unprecede­nted heights surpassing $73,000, establishe­s a persuasive prece­dent for this endeavor.

A Hong Kong ETF, coupled with the­ Stock Connect program’s reach into mainland China, could catalyze a ne­w era for Bitcoin in Asia. An inflow of $25 billion from mainland investors would undoubtedly ge­nerate significant momentum, furthe­r mainstreaming Bitcoin and solidifying its status as a global asset class.

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Crypto Menace: China Races to Resolve Urgent Laundering Threat by 2025

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The intersection of cryptocurrency and anti-money laundering (AML) efforts has become a focal point for legal scholars and policymakers globally. In China, the urgency to address the challenges posed by money laundering involving virtual assets has prompted significant legislative efforts. Chinese scholars emphasize that the evolving landscape of financial crimes demands a comprehensive response, with the most recent development being the anticipated passage of the revised Anti-Money Laundering Law in 2025.

As technology advances, criminals exploit new avenues, including cryptocurrencies, for illicit activities. The revised draft of China’s Anti-Money Laundering Law, discussed extensively since its first public solicitation for opinions in 2021, reflects the nation’s commitment to staying ahead of financial crimes. Prime Minister Li Qiang’s executive meeting on January 22, 2024, marked a pivotal moment in the legislative process, highlighting the arduous journey of refining AML laws.

Historically, money laundering, a term born in the United States during the 1930s, was closely linked to upstream crimes such as drugs, organized crime, and corruption. However, with the evolving global landscape and the recognition of money laundering as a channel for terrorists, its scope has expanded. Chinese experts emphasize the escalating threat, characterizing money laundering as a non-traditional weapon that can influence and invade nations.

China’s commitment to combating money laundering is evident in its increased crackdown on financial crimes. From January to November 2023, procuratorial organs prosecuted 2,435 individuals for money laundering crimes, reflecting a year-on-year increase of 16.6%. The legislative efforts also align with global standards, as China became a formal member of the Financial Action Task Force (FATF) in 2007.

The FATF, in its 2019 mutual assessment report on China, acknowledged positive progress but highlighted areas for improvement. One significant focus is the inclusion of specific non-financial institutions in supervision. Chinese scholars emphasize that these institutions, including lawyers and auditors, are increasingly favored by criminals, requiring regulatory attention to curb money laundering activities.

Preventive Crypto Measures: Drafting Defense Against Financial Crimes

The revised draft aims to address challenges posed by virtual assets and cryptocurrencies. The ban on Bitcoin in China reflects the country’s cautious approach to digital currencies. The draft mandates financial institutions to assess money laundering risks associated with new technologies and products, emphasizing preventive measures.

Despite these strides, scholars argue that the legal framework should also provide operational guidance on seizing, freezing, and confiscating virtual asset money laundering proceeds. Additionally, improvements in the judicial relief mechanism are deemed crucial to protect citizens’ rights and interests, preventing unintended consequences of account freezes or deductions.

As China prepares for the fifth round of FATF assessment, the revised Anti-Money Laundering Law is positioned as a pivotal component to demonstrate the nation’s commitment to combating financial crimes effectively. The evolving nature of money laundering, particularly in the realm of crypto assets, necessitates continuous legislative adaptation to maintain financial security in an ever-changing global landscape.

China’s Crypto Crackdown: No Sign Of Easing In 2024

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China has been cracking down on cryptocurrencies since late 2017, viewing them as threatening its financial stability and sovereignty. Despite rumors of a possible policy change, there is no evidence that China will soon ease its crypto restrictions.

The Chinese authorities have long been wary of decentralized digital currencies, such as Bitcoin, that operate outside the control of the state. They believe that digital currencies pose a systemic risk to the financial system, as they can facilitate capital flight, money laundering, and illegal activities.

According to the Chainalysis Blockchain data platform, more than $50 billion worth of digital currencies left East Asian accounts in areas outside the region between 2019 and 2020. As China has an outsized presence in East Asian cryptocurrency exchanges, Chainalysis staff estimate that much of this net outflow of digital currencies was capital flight from China.

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Source: Chainalysis

China imposes strict capital controls to limit the amount of foreign currency residents can buy or sell yearly. Digital currencies, however, can bypass these restrictions and enable people to transfer their wealth abroad more easily and anonymously.

China’s Evolving Crypto Tax Landscape

In addition to banning digital assets transactions and mining, China has also tried to regulate the taxation of crypto-related activities. In early January 2024, the Shanghai Municipal Tax Service published an online article explaining how personal income tax applies to digital currency transactions in China.

Shanghai Municipal Tax Service article, which censors later deleted, sparked speculation that China was preparing to ease its crypto ban. However, the article was not an official policy document and did not indicate any change in China’s’ stance on digital currencies.

According to Beijing-based lawyer Guo Zhihao, individuals who obtain virtual currencies from other players through online transactions and generate revenue by selling them at a higher price must pay income tax on such earnings. While China has denied legal tender status for digital currencies, it has not yet outlawed its attribution as property or a commodity.

China’s Distinctive Web3 Vision

Another common misconception involving China’s’ crypto policies is that China will relax its crypto restrictions because of its interest in Web3, the next generation of the internet that relies on blockchain technology and decentralized applications. However, China’s vision of Web3 differs from that of most of the world.

China aims to develop a Web3 ecosystem with Chinese characteristics, that is, under the supervision and guidance of the state. In late December 2023, China’s’ Ministry of Science and Technology announced its plans to release a Web3 strategy document focusing on innovation, security, and government obligations.

China wants to use Web3 to enhance its industries, such as energy, trade, and law, but not to empower non-state actors in the financial system. Therefore, China’s’ crypto crackdown is unlikely to change in 2024, as the country sees more risks than benefits from allowing the free flow of cryptocurrencies.

China’s’ crypto policies reflect its broader trend of increasing state intervention in the economy and society, as exemplified by the “common prosperity” campaign. China’s’ crypto investors and enthusiasts will face more challenges and uncertainties in the coming year.

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China Sends Mixed Signals On Cryptocurrency Restrictions And Tax Rules

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The Chinese government has had a turbulent relationship with cryptocurrencies like Bitcoin over the past few years, oscillating between crackdowns and potential openings. A recent document from the Shanghai Taxation Bureau again muddies the waters on China’s’ stance.

The document deals with “personal income tax on incomes derived from individuals’ online virtual currency trading.” It states that income from “buying and selling virtual currency from online players and selling them to others at a profit margin is subject to personal income tax.”

The key uncertainty lies in exactly what constitutes a “virtual currency.” In China, this term has traditionally been used to describe in-game currencies for online games, like weapon skins or premium currencies used to purchase upgrades. However, it could also apply to cryptocurrencies like Bitcoin and Ethereum.

If strictly interpreted as only applying to video game currencies, the move would have little impact on the cryptocurrency market. However, a more expansive definition, including cryptocurrencies, could have mixed implications.

China’s Cryptocurrency Taxation Impact

If cryptocurrencies are included under the virtual currency umbrella, it would represent a major shift in China’s stance. Recognizing and taxing cryptocurrency gains implies a baseline acceptance of their legitimacy. This could catalyze further adoption among Chinese companies and consumers.

However, enforcing stringent taxation may deter everyday Chinese citizens from investing in or using cryptocurrencies as a medium of exchange. This could negatively impact prices and stifle grassroots adoption.

At the moment, the market has not reacted strongly in either direction to this latest policy update. Prices for major cryptocurrencies like Bitcoin have remained stable. However, as more details emerge, we could see increased volatility.

China’s relationship with cryptocurrency has been full of twists and turns. This latest tax document introduces further uncertainty. While tentative acceptance could positively impact adoption, strict taxation enforcement may undermine cryptocurrency use cases. The coming weeks and months will prove pivotal in finally gauging the Chinese government’s true intentions.

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Blockchain-Based Identity Verification System Launched In China

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China has launched a blockchain-based identity verification system that will allow its 1.4 billion citizens to prove their real names online while protecting their privacy and data. The system, called RealDID, is developed by the Blockchain-based Service Network (BSN), China’s national-level blockchain initiative, with the support of the Ministry of Public Security.

RealDID is a decentralized identity (DID) solution enabling users to create and manage their digital identities using distributed ledger technology. Users can register and log in to websites using their DID addresses and private keys without revealing their personal information or linking their business data and transactions to their identities.

According to BSN, RealDID is the world’s first national-level real-name DID system, and it aims to improve the security, efficiency, and convenience of online identity verification. RealDID also complies with the global DID standards and supports cross-chain interoperability, meaning users can use their DIDs across different blockchain platforms and applications.

Blockchain Real-Name Policy Sparks Controversy In China

The launch of RealDID comes amid China’s efforts to enforce a real-name policy for social media platforms, which requires content creators with over 500,000 or 1 million followers to publicly display their real names or those of their financial backers. The policy, reported by state media in October, is intended to enhance credibility and enable public supervision of online content.

However, some critics have raised concerns over the potential impact of the real-name policy on freedom of expression and privacy rights. They argue that the policy could expose content creators to censorship, harassment, or legal repercussions for expressing dissenting opinions or sensitive topics.

The development of RealDID also reflects China’s ambition to become a global leader in distributed ledger technology, which President Xi Jinping has endorsed as a strategic priority. China has been investing heavily in blockchain research and development and promoting the adoption of blockchain applications in various sectors, such as finance, health care, logistics, and governance.

However, China’s blockchain initiatives have also attracted scrutiny and opposition from some foreign governments, especially the U.S., which views China’s blockchain activities as a potential threat to its national security and data privacy. A collaborative U.S. proposal aimed to prohibit federal officials from utilizing Chinese distributed ledger technology and engaging with entities such as iFine­x, Tether’s parent company.

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Crypto-Linked Corruption Leads to Life Imprisonment of Former Official in China

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Involvement in facilitating cryptocurrency mining operations has led to a life imprisonment sentence for Yi Xiao, a former member of the Chinese Communist Party (CCP), as decreed by a Chinese court in response to corruption charges. Yi Xiao, who previously held the position of vice chairman within the Jiangxi provincial committee of the People’s Political Consultative Conference, has also been found guilty of abusing his power. The court’s verdict stemmed from his acceptance of over 125 million yuan ($17.1 million) in bribes spanning from 2008 to 2021.

Additionally, while serving as the party secretary of Fuzhou City, Xiao provided assistance to companies engaged in digital asset mining, a prohibited activity in China. The court stated that these actions resulted in substantial losses to public assets and the interests of the nation and its people. Consequently, Xiao has been sentenced to life imprisonment, along with a revocation of all his political rights and the confiscation of his personal assets.

China’s Evolving Stance on Cryptocurrency

China’s historical relationship with digital asset’s has been marked by turbulence. As far back as 2013, the nation initiated measures to distance itself from crypto, prohibiting banks from engaging in crypto transactions. Subsequently, in 2017, China extended its restrictions by banning Initial Coin Offerings (ICOs), a move intended to bolster the national currency, the yuan, and curtail the illicit outflow of funds.

By 2019, the focus shifted to Bitcoin (BTC) mining, with the National Development and Reform Commission (NDRC) designating BTC mining as “undesirable.” This signaled the government’s apprehensions about the practice. The year 2020 witnessed an intensified crackdown on the burgeoning crypto sector, as the People’s Bank of China (PBoC) revealed its intent to block more than 100 foreign websites providing crypto exchange services.

Nevertheless, it wasn’t until 2021 that China’s ban on crypto mining became fully operative. Prior to this, provinces such as Inner Mongolia, Xinjiang, and Sichuan had functioned as significant Bitcoin (BTC) mining centers, collectively contributing to nearly half of the global BTC mining power. The definitive blow materialized in September 2021 when the country chose to enact a comprehensive prohibition on crypto mining activities.