China Central Bank 'Blacklists' Local Bitcoin OTC Merchants

The People’s Bank of China (PBoC), the nation’s central bank, is flagging accounts related to large cryptocurrency traders in its latest crackdown, according to local news outlet WuBlockchain. 

The move is part of a broader crackdown on money laundering in China. Earlier this year, the PBoC launched its drive to eradicate illegal earnings and partnered with the country’s local banks to share account information and transactional details to prevent the proliferation of unlawful funds, of which cryptocurrencies form a part in China.

Facing the brunt are China’s over-the-counter (OTC) crypto dealers—or firms that conduct trades outside of the public market (such as on crypto exchanges) and usually transact with upwards of millions of dollars.

Some crypto OTC accounts have reportedly been put on a “blacklist” maintained by the PBoC and are forbidden to use bank-issued cards for the next three years or conduct online transactions in the next five years, the report said. These rules apply to all blacklisted accounts and are not limited to cryptocurrency accounts.

The specific process is that, after a bank’s risk system has flagged and restricted transactions from a certain account, it reports the account to a regional branch of the PBoC.  This ensures that information regarding blacklisted accounts is then shared across all Chinese banks, hence preventing OTC dealers from opening new accounts in other locations.

Lack of laws affecting business

The move has to lead to many crypto OTC dealers shutting down their business in fear of repercussions, the report said.

However, some industry observers say the blacklisting does not apply to simple cryptocurrency sales. “Normal cryptocurrency transactions are not illegal, and only those involving black money and illicit assets will be frozen,” said crypto exchange and OTC desk Huobi, in the report.

Still, the lack of unified rules across all banks would mean an OTC business would find itself in the blacklist regardless of its legitimacy, the report noted. China has no concrete laws on cryptocurrencies either, making the asset class a legal gray area and hence susceptible to the judgment of individual banks.

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For China, the crackdown on cryptocurrencies is ironic considering its development in state-backed digital currencies. On the one hand, the country is pushing to launch the digital yuan—its digital version of the national fiat—and is already conducting testing in rural areas and taxi-sharing services. But public cryptocurrencies like Bitcoin are a strict no-no. Or perhaps that's all part of its plan.