Under the impact of the Chinese government’s recent formal notices of halting ICOs, Notice 99 and Joint Notice released on September 2, 2017 and September 4, 2017 respectively [1], Beijing authorities have taken further actions and held meetings with Beijing-based trading platforms with regard to a trading halt on September 15, 2017, following Shanghai’s “verbal notice” of a trading halt and the Shanghai-based exchange BTCChina’s sudden announcement of a halt to its trading on September 14, 2017.
The Beijing authority implementing the policy is the Office of Internet Financial Risks Rectification Working Group of Beijing (the “authority”), a specialized working group that is located at the Beijing Finance Bureau. It is reported that the office interviewed Beijing-based cryptocurrency trading exchanges on September 15, 2017 and subsequently distributed internally an urgent notice to these exchanges, stating that these platforms shall announce a detailed date for closing and refunds by midnight on September 15, 2017. [2]
The internally circulated notice is the Rectification Requirements for Beijing-based Virtual Currency Exchanges (the “Notice”). It requires that all trading exchanges shall act immediately and publish a notice by midnight on September 15, 2017 to announce the date for a halt to trading and also to announce a stop to new user registrations. In addition, the Notice demands that all trading exchanges shall, by 18:00 on September 20, 2017, develop detailed plans for arranging withdrawals in a risk-free manner and keep only one bank account for the deposit of customer funds, canceling other bank accounts and non-banking payment institution accounts. Further, the Notice imposes obligations on the management of the exchanges, stating that shareholders, the actual controller, senior management, CFO, and chief technical person of all trading exchanges shall stay in Beijing and spare no efforts to ensure the smooth progress of rectification and withdrawal during the process of withdrawals. In addition, it asks for the exchanges to keep the customers’ transaction and asset data properly, and to submit the disk containing these data to the local Finance Bureau. [3]
The next day, September 16, 2017, according to statistics published by Chinese media, more than 24 platforms had announced their plans to halt trading before the deadline set forth in the Notice, including the major Chinese trading exchanges Huobi and OKCoin. [4] Announcements of the trading halt can be seen from the homepages of these exchanges. Many of the exchanges cite the “Joint Notice” as the basis of their action, and they have announced that they will post phase-out plans by the end of October 2017.
Note: Perkins Coie LLP is based in the United States and is duly registered as a foreign law firm in the PRC. Consistent with applicable PRC regulations, the discussion herein is not, and should not be construed as, a legal opinion regarding the application of Chinese law.
[1] See our previous blog post of September 18, 2017: https://www.virtualcurrencyreport.com/2017/09/china-halts-icos-and-token-sales-and-china-based-trading-platforms-suspend-trading-amid-reports-of-additional-government-restrictions/#more-3367
[2] http://caijing.chinadaily.com.cn/2017-09/18/content_32145936.htm