Topic: [2017-03-22]Chinese Bitcoin Exchanges Demand Users to Explain Sources of Funds (Read 228 times)

Chinese Bitcoin exchanges have begun to demand users to provide detailed information on the origin of their funds and how they intend to use the funds they acquire.

Users of Huobi, one of the two Bitcoin exchanges flagged by the People’s Bank of China for weak Know Your Customer, hereinafter KYC and Anti-Money Laundering, hereinafter AML systems, were asked to specify the origins of their funds, bank transfer records of moving funds from a legitimate bank to Huobi, extensive explanation on the transfer and lastly, where the money is transferred to.

For instance, if Alice plans to purchase $10,000 worth of Bitcoin from Huobi, Alice will first have to initiate a bank transfer from her bank to Huobi’s bank account. For the sake of this explanation, let’s assume Alice is transferring $10,000 from her Chinese bank account secured by HSBC.

When the transfer is completed and Huobi receives the funds from HSBC to process the purchase, Alice will then be required by the exchange due to tightened KYC policies to explain how she obtained the $10,000, to begin with, how the transfer was made, how she intends to use Bitcoin and where her funds will be transferred to.

The list of requirements
CNLedger, a Bitcoin news agency in China, translated the requirement document received by Huobi users.

With this step, we expect #bitcoin withdraws from major exchanges become available soon.

— cnLedger (@cnLedger) March 21, 2017
According to the CNLedger team, users are formally required to submit these four documents in order to trade with any Bitcoin exchanges within the Chinese market. These requirements are in part of the PBoC’s new KYC and AML systems drafted for Bitcoin exchanges.

The document reads:

Your account info at Huobi

Your login info

Your account UID

Explanations of the sources of your funds

Bank transfer records to Huobi bank account

Explanation of the sources of the funds you transferred

Relevant proof that can back up point b.

Provide sources of funds

Historical bank transfer record details

Text description of the fund source

Screenshot or pictures of bank information

Use of Bitcoin or litecoin particularly how the user intends to use the funds

Chinese Bitcoin regulation compared to Japan and South Korea
Governments of Japan and South Korea have both regulated their respective Bitcoin markets. In contrast to China, KYC and AML policies in Japan and South Korea require users to submit relevant information on the source of funds but prevent from demanding users extensive history of their bank transfers.

The implementation of such irregular, inefficient and impractical KYC and AML policies explain the recent surge in the weekly volumes of LocalBitcoins and other over-the-counter (OTC) markets. Investors and traders are finding it difficult to trade on local trading platforms as a result of tightened KYC policies.

CNLedger noted that only after these KYC and AML policies were added to Huobi and OKCoin were they able to operate again. Since the document has been sent out to their users, CNLedger states that Huobi and OKCoin will soon release user funds and allow users and traders to withdraw their funds again.

On March 6, the Financial Times reported that China’s banking system overtook the Eurozone to become the world’s largest system by assets. It seems as if China will continue to regulate markets like the Bitcoin industry as its financial system grows larger in size and value.
https://cointelegraph.com/news/chinese-bitcoin-exchanges-demand-users-to-explain-sources-of-funds