Popular exchange OKCoin has announced more stringent anti-money laundering (AML) procedures for its customers worldwide. The new measures are part of several stricter new identification conditions at China-based exchanges, mandated by the national government.
Previously, Chinese exchanges were popular with international customers in part due to more casual identity requirements. Many did not require proof or real names. With that look set to change fairly quickly, the exchanges will need to find other ways to attract business.
The New Rules at OKCoin
Twitter user @cnLedger posted a message regarding the new information in a screenshot. New KYC/AML measures include:
1. New identity requirements after $10,000 USD. Once an account’s lifetime deposits reach $10,000 total, OKCoin staff may contact customers to perform enhanced due diligence procedures. These may include a live video interview, during which a customer needs to produce legal ID.
2. Prompts for regular changes to passwords and 2FA (Google Authenticator) keys.
3. Correct information requirements. Customers will no longer be able to register accounts under pseudonyms or nicknames. Those who have existing accounts under names other than their real ones will need to close them or provide real information.
4. Non-multisig addresses for BTC and LTC will no longer work after 23rd April. Previously, OKCoin customers used ordinary, single-signature addresses for customer accounts but switched to multi-signature for both currencies on 10th April.
None of the new rules are particularly draconian, by international finance standards. It should be noted that KYC/AML requirements in most countries already require some kind of valid national identification and proof-of-address to trade, at least in large amounts.
What’s the Future Like for Chinese Exchanges?
As well as lax ID rules, China-based cryptocurrency exchanges grew to enormous sizes also thanks to fee-free trading, high leverage and automated trading. Observers also speculated that local Chinese customers were using bitcoin to move funds out of the country and possibly avoid taxes.
However the exchanges’ frenetic trading activity came to a screeching halt at the beginning of this year. The People’s Bank of China announced it would meet with representatives from all exchanges, and sent senior officials to conduct on-site inspections.
The exchanges also briefly halted all withdrawals until the inspections finished.
In March, the PBOC announced a set of new rules for cryptocurrency exchanges. Leverage and margin trading was now prohibited, along with the (infamous, rumored) practice of padding exchange volumes with in-house bot trading.
The companies would also have to comply with stricter AML laws, as well as those governing currency controls, taxes, investment scams, and curiously, “Replacing fiat by using bitcoin to purchase goods”.
Competitors Also Tightening Control
Rival exchange Huobi also announced it would close its BitVC spot trading service for CNY and USD on 1st April. In a message to customers, Huobi said the closure was due to “business adjustments”. It requested users convert fiat assets to bitcoin or litecoin and begin to withdraw them.
In addition, Huobi required customers withdrawing funds in the wake of the closure to provide personal information, sources of the funds to be withdrawn, and details on the withdrawal destinations. On 7th April, Huobi announced it would suspend withdrawals for BTC and LTC altogether.
As cryptocurrencies increase in both value and appeal worldwide, governments are taking notice. The once-anarchic economies are experiencing a dose of centralized legal reality — at least where their value still needs to be traded into national fiat currencies.
Are you an OKCoin customer? Will new rules in China make you less or more likely to used exchanges there? Let us know.
Images via OKCoin, Pixabay