Please Note: This translation is intended to serve as a guide to international users, and should not be viewed as an authoritative document. At this time, the People’s Bank of China and other associated ministries have not released an official English translation of their statement on Bitcoin.

The People’s Bank of China and Five Associated Ministries Notice: “Prevention of Risks Associated with Bitcoin”

To safeguard the interests and property rights of the public, to protect the legal standing of the Renminbi, to precaution against the risk of money laundering and maintain financial stability, the People’s Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission have jointly issued “People’s Bank of China, Ministry of Industry and Information Technology of China, China Securities Regulatory Commission, China Banking Regulatory Commission and the China Insurance Regulatory Commission Notice on the Prevention of Risks Associated with Bitcoin” (Bank Notice [2013] No. 289, hereinafter referred to as “Notice”).

[Notice] Clearly defining the nature of Bitcoin, which is not issued by a central monetary authority, it does not possess characteristics of legal tender, and does not have real meaning as a currency. On the nature of Bitcoin, Bitcoin is a specially-designated virtual commodity or good, and does not have the same legal status as currency, and cannot be used as circulating currency in the market. However, Bitcoin trading constitutes a method of buying and selling commodities online, and ordinary people are free to participate, so long as they are willing to assume the risk.

[Notice] It is required that, at this stage, financial and payment institutions may not use Bitcoin pricing for products or services, may not buy or sell Bitcoins, may not act as a central counterparty in Bitcoin trading, may not offer insurance products associated with Bitcoin, may not provide direct or indirect Bitcoin-related services to customers, including: registering, trading, settling, clearing or other services; accepting Bitcoin or use of Bitcoin as a clearing tool; trading Bitcoin with CNY or foreign currencies; storing, escrowing, and mortgaging in Bitcoin; issuing Bitcoin-related financial products; and using Bitcoin as a means of investment for trusts and funds.

[Notice] It is required that, websites serving primarily as Bitcoin trading platforms, must, according to the Telecommunications Regulations of the People’s Republic of China and the Internet Information Services Managing Guidelines, legally register with the Telecommunications Bureau. Meanwhile, Bitcoin has a comparatively high risk of use for money laundering or by criminal actors; this Notice requires that all relevant institutions comply with relevant authorities and with the People’s Republic of China Anti-Money Laundering Law, and fulfill requirements related to customer identification, submit “suspicious transaction” reports and fulfill other statutory anti-money laundering obligations, preventing the risk of money laundering associated with Bitcoin.

In order to prevent the use of Bitcoin and other “virtual currencies” for use in excessive speculation, posing a risk to the public interest and the legal status of the Renminbi, “Notice” requires that financial institutions and payment institutions should, in their daily work, employ the concept of proper money, focus on strengthening public knowledge of currency, maintain a proper understanding of currency and of virtual goods and commodities, practice rational investment, reasonably limit investment risk, safeguard individual property, and other concepts included in financial literacy activities, and guide the public to establish a firm understanding of concepts related to currencies and investment.

The People’s Bank of China

Ministry of Industry and Information Technology

China Banking Regulatory Commission

China Securities Regulatory Commission

China Insurance Regulatory Commission

December 3rd, 2013


PBOC Spokesperson Answers Press Questions on Current Bitcoin-Related Affairs

Q. What is China’s current definition on the nature of Bitcoin?

A. Bitcoin has four main features: It is decentralized and not issued by any government; the supply of Bitcoins is limited; the use of Bitcoins has no geographical restrictions and users can make transactions anonymously.

Although people have been referring to Bitcoin as “currency”, it is not issued by a central monetary authority, it does not have the properties of legal currency and it is not a currency in the real meaning of the word. Thus, Bitcoin is a special kind of virtual good; it does not have the same legal status as a currency or monetary equivalent. It cannot and should not be used as a currency circulating in the market.

Q. What are the current risks involved with Bitcoin? Will it have an impact on China’s existing financial system?

A. Currently, the public lacks sufficient understanding of Bitcoin, and some individuals have been caught up by faddishness or a speculative mentality in holding, using and trading in Bitcoins. From its nature as a virtual commodity, it may involve the following risks:

First, it possesses high speculative risk: the current Bitcoin market capacity is relatively small; it is open to 24 hour continuous trading; there is no limit to how much the value can change; and the price can easily be controlled by opportunistic speculators, generating severe volatility and huge risks. Ordinary investors who blindly follow the crowd can easily suffer major losses. Meanwhile, the Bitcoin market is still in a state of self-regulation, which can lead to counterparty risk, financial safety risk, and aspects of clearing and settlement risk. This makes it difficult for investors to protect their lawful rights and interests.

Second, there is a comparatively high risk of money laundering. Since the use of Bitcoins has no geographical restrictions, and users can make transactions anonymously, it is difficult to trace the flow of funds. This makes it susceptible to money laundering and terrorist financing activities.

Third, is the risk of it being exploited by criminals or organized crime. Around the world, Bitcoin has been used for drug and weapons transactions, and other illegal activities. Such cases have been investigated. Meanwhile, the status of individual Bitcoin trading websites is varied: some sites have not been legally registered and are suspected of illegal operation; and some sites have poor security and safeguards, and can easily be attacked by hackers, or run the risk of site's operators absconding with the money.

At present, Bitcoin does not bring systemic risks to China's financial system, as the number of Bitcoins in circulation is comparatively small and the market scope is limited. Also, financial institutions are not directly involved in Bitcoin trading and investment activities.

Q. What are the key points covered in the Notice on “Prevention of Risks Associated with Bitcoin” jointly released by the People’s Bank of China and five other ministries?

A. The People's Bank has been closely monitoring the movements of Bitcoin, and has been following the policies and actions of the relevant regulatory agencies around the world. On December 3rd, the People’s Bank, in conjunction with the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission have jointly issued “People’s Bank of China, Ministry of Industry and Information Technology of China, China Securities Regulatory Commission, China Banking Regulatory Commission and the China Insurance Regulatory Commission Notice on the Prevention of Risks Associated with Bitcoin” (Bank Notice [2013] No. 289, hereinafter referred to as “Notice”). Aside from clearly defining Bitcoin as an online virtual commodity or good, the "Notice " mainly clarified the following:

First, financial and payment institutions cannot engage in Bitcoin-related business or denominate prices for goods and services in Bitcoin. They may not buy or sell Bitcoins, act as a central counterparty for buying and selling Bitcoin, provide underwriting for Bitcoin insurance, and may not sell Bitcoin-related insurance, trading or other services, conduct Bitcoin storage, issue mortgages in Bitcoin, or set up investment funds or trusts based on the currency.

Second, websites that provide Bitcoin-related services will be asked to register with the country's telecommunication authorities. To implement anti-money laundering measures, users are obliged to register with their real identities and the relevant sites must report any suspicious transactions.

Third, financial institutions and payment institutions should, in their daily work, employ the concept of proper money, focus on strengthening public knowledge of currency, maintain a proper understanding of currency and of virtual goods and commodities, practice rational investment, reasonably limit investment risk, safeguard individual property and other concepts included in financial literacy activities, and guide the public to establish a firm understanding of concepts related to currencies and investment.

Q. Will People’s Bank implement further regulatory measures on Bitcoin transactions in the near future?

A. Bitcoin trading is a kind of buying and selling goods or commodities online, and ordinary people have the freedom to participate, provided they assume the risks themselves. Next, the People's Bank will work with the relevant ministries to supervise the financial institutions, payment institutions and websites that provide Bitcoin registration, trading and other services to assist in implementing the "Notice" provisions. Meanwhile, the People’s Bank will continue to pay close attention to the movements of Bitcoin and associated risks; to further increase public’s knowledge on currency; and to guide people towards a correct understanding of the concept of a currency and concepts of investment.