Recently, Chinese regulatory authorities have successively issued strong regulatory signals, and the price of Bitcoin has undergone the largest adjustment this year. After the financial committee meeting set the tone, Inner Mongolia quickly issued local rules on cracking down on virtual currency mining. The content is quite strict, forcing many mining machine manufacturers to “go out to sea.” In addition to the mining process, “freezing cards” are becoming more and more frequent.
“Excuse me, is this frozen card?”
Hundreds of netizens gathered in a rights protection group, including those whose bank cards were frozen, some whose exchange accounts were frozen, and some whose positions were liquidated due to the stock exchange’s downtime on May 19th. Recently, the news has been “lively” every day. extraordinary.
“My Alipay has also been frozen, so it’s scrapped.” Group friends said, “It’s useless to contact the bank or the police station. Just wait. It can be as short as three days, and as long as half a year. If you contact, you may be asked to make a transcript. .”
“I suggest not to play on the XX exchange. My account was also frozen. I only charged money but did not withdraw cash. I said that my flow was abnormal. I only charged 150,000 and it was frozen the next day. The frozen police station was Jinggangshan, Jiangxi. Call to say that there is an abnormal flow.” The frozen account was not only the group friend, but also this exchange.
“How come so many difficult friends in XX are frozen, unable to withdraw coins, and cannot sell coins?” At the end of May, dozens of people were suddenly added to the rights protection group. After the Solitaire was launched, 20 group friends with frozen accounts filled out their personal information. And amount.
The group friends of the frozen account asked the staff of the exchange, and the response was “Your account is required to be frozen by the police.” The frozen document was told that you need to ask the customer service, and the expected time for the customer service to consult is more than 6 hours. It was the first time I heard that the account was frozen by the police station, and the account management power was in the hands of the exchange. The group friends also said that they had never heard of it.
Several domestic virtual currency exchanges actually “goed out to sea” after the regulatory turmoil on September 4, 2017, and moved their servers overseas, but Chinese users can still trade on the exchanges via the Internet.
According to The Block Research data, as of May 27, the supply of US dollar stablecoins exceeded 100 billion US dollars, with USDT accounting for approximately 62%, USDC accounting for approximately 20.42%, and BUSD accounting for approximately 8.89%. From the beginning of 2021 to April 30, the transaction volume on the USDT chain was 10,100 US dollars. We don’t know how much transaction volume Chinese users contribute, but some stable currency transactions have become a convenient means of money laundering.
Relevant personnel of a certain exchange stated that the current channel for using virtual currency to launder money is mainly a “score platform.” The “running sub-platform” is linked to the entrance of a gambling platform or other APP, aggregates third-party payment, cooperative banks and other service provider interfaces, uses leased bank cards and payment accounts to recharge gambling funds, uses flexible labor platforms to withdraw cash in China, and uses underground banks And cross-border withdrawals of virtual stablecoins. Stable coins have become the “new favorite” of these platforms.
On May 18, 2021, the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association jointly issued the “Announcement on Preventing the Risk of Virtual Currency Transaction Hype”, clearly cracking down on and restricting the virtual currency transaction exchange business, requiring financial institutions and payment Institutions and other member units are not allowed to conduct business related to virtual currency.
On May 21, the Financial Committee of the State Council held a meeting to specifically emphasize the crackdown on Bitcoin mining and trading, and resolutely prevent individual risks from being transmitted to the social field.
The use of virtual currency to commit crimes is becoming more frequent, and public security actions are also increasing. On May 12, 2021, the Hangzhou Xihu District People’s Court tried the case of Zhao Dong, a well-known over-the-counter trader, on suspicion of illegal business operations and aiding in information cybercrime activities, which attracted the attention of the industry. According to reports, the prosecution explained the lawsuit mainly based on the simple KYC review of the name and ID number, and the funds mainly came from the fourth-party payment platform transactions of the overseas gambling platform “Run Points”. Sentenced to fixed-term imprisonment of not more than three years and fined.
A lawyer said, “Unknowing traders may be frozen for being involved in money laundering and received black money but they don’t know it.” Due to the anonymity of virtual currencies, over-the-counter transactions have become the hardest hit area for black and gray assets such as online gambling. , Which has previously become a key area of supervision for anti-money laundering by regulatory agencies, and the recent “freezing card” phenomenon has become even more serious.
An investor reported that payment cannot be made using WeChat Pay transactions and the transaction function is restricted. WeChat Pay’s response is, “The current transaction is suspected of fraud.”
On May 19, some exchanges closed the over-the-counter trading section after the announcement of the three associations. A person familiar with the matter said, “The exchange did not receive a notice from the regulatory authorities, and closing the transaction is an active hedging.
How to “anti-freeze” has always been a problem in the currency circle in the industry. The entry barrier for over-the-counter merchants is not high. Based on exchanges, they make profits by collecting the difference between buying and selling USDT. This group of people has long been recognized in the circle as a group of “sounding fortune”.
They are quite experienced in avoiding freezing cards. When conducting off-exchange transactions, merchants will specifically indicate that it is forbidden to remark words such as digital currency, Bitcoin, USDT, etc., otherwise the bank will detect it and freeze the card. In addition, most merchants only receive funds that have been deposited in the bank card for more than 3 days, and they need to look at the bank flow for nearly 3 to 5 days for video verification.
There are also many large-scale transaction merchants who directly choose offline transactions, and even use credit cards to collect payments. “If you simply empty the credit card, the payment will be automatically repaid, and it will be fine if it is frozen. Anyway, you don’t owe money.”
Although there are many solutions to the antifreeze card, no one can guarantee that it will be foolproof. Many people who want to recharge and withdraw money keep asking “have many cards frozen recently? Which one is not easy to be frozen?”, so many off-site merchants promised “safety guarantee and compensation for frozen cards.”
The level of China’s regulatory statement this time is unprecedentedly high, but in the face of the new decentralized virtual currency, the existing regulatory methods are inevitably inadequate. After the mine is shut down, more advanced chips may appear in the future, and any equipment can be used to mine. It is also difficult for frozen cards to completely prohibit individuals from transferring money to individuals.
Virtual currency supervision is a problem on a global scale. At present, the United States has not yet formed a unified regulatory framework for virtual currencies, and scattered proposals have emerged. For example, on May 20, the U.S. Treasury Department stated in a tax report that cryptocurrency transfers of more than $10,000 must be reported to the Internal Revenue Service; on May 26, Gary Gensler said during a congressional hearing, Cryptocurrency regulation requires that investors in cryptocurrency exchanges enjoy the same protection as on the New York Stock Exchange or the Nasdaq platform.
There are always many problems with new things, and the growth of Bitcoin has always been accompanied by a regulatory game. Before the rules of this industry are perfected, the “frozen card” storm may continue…
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.