An Overview of the Regulatory History of Cryptocurrency Exchanges in China
Since 2017, the Chinese government has implemented sustained and stringent regulatory measures targeting virtual currency trading, profoundly altering the landscape of the cryptocurrency market in China and around the world.These policies aim to prevent financial risks, maintain economic order, and combat illegal activities related to virtual currencies. Against this backdrop, numerous trading platforms that had previously operated within China were forced to shut down or restructure; the evolution of BTER is a particularly telling example.
The 2017 Regulatory Crackdown and the Wave of Closures of Domestic Trading Platforms
In September 2017, seven government agencies—including the People's Bank of China (PBOC)—jointly issued the “Announcement on Preventing Risks Associated with Token Issuance Financing,” which comprehensively banned initial coin offering (ICO) activities. Subsequently, regulatory authorities further mandated the closure of all virtual currency trading platforms within China. This series of measures triggered severe market turmoil:
- Responses from Major Platforms: As the first Bitcoin trading platform in mainland China, Bitcoin China (BTC China) announced on September 14, 2017, that it would suspend new user registrations and cease all trading operations on September 30.Shortly thereafter, HTX (Huobi) and OKCoin (OKCoin) also announced that they would suspend all virtual currency trading operations between the end of September and the end of October of that year.
- Market Impact: Following the announcement of Bitcoin China’s shutdown, the price of Bitcoin rapidly fell below 20,000 RMB—a drop of more than 25% within half a month compared to the approximately 30,000 RMB recorded in early September. Other major digital currencies, such as Litecoin and Ether, also experienced significant declines.
- Over-the-Counter (OTC) Trading Picks Up: With the closure of domestic exchanges, OTC trading volume on Bitcoin has increased significantly. The share of BTC-CNY OTC trading volume on platforms such as LocalBitcoins and Paxful rose from about 5% to approximately 20% at one point.
BTER’s Transformation and the Birth of Gate.io
BTER was one of the earliest cryptocurrency exchanges established in China in 2013 and was known for supporting trading in a variety of altcoins.Faced with the evolving regulatory environment in China and other regions, BTER undertook a strategic restructuring. To adapt to the global market and mitigate domestic regulatory risks, BTER officially rebranded as Gate.io in 2017 and shifted its business focus entirely to overseas markets, committing to providing cryptocurrency-to-cryptocurrency trading and over-the-counter (OTC) services to users worldwide.
The 2021 Comprehensive Ban and Market Reshaping
In September 2021, China further tightened its regulation of virtual currencies. Ten government departments, including the People's Bank of China (PBOC), jointly issued a notice explicitly banning all virtual currency trading activities and classifying services provided by overseas virtual currency exchanges to residents within China as illegal financial activities. This ban had far-reaching consequences:
- Platform Wind-Down: Major international exchanges such as HTX and Binance announced they would suspend new user registrations in mainland China and planned to phase out existing mainland Chinese users by December 31, 2021.
- Price Volatility: Following the release of the notice, the price of Bitcoin plummeted by several thousand dollars in a short period, marking a 6% decline.
- Globalization Trend: This ban has further accelerated the shift of China’s cryptocurrency market toward other jurisdictions worldwide, driving the industry’s global compliance and diversification.
Considerations Behind China’s Regulation
The Chinese government’s strict regulation of virtual currency trading is primarily based on the following considerations:
- Prevention of Financial Risks: Virtual currencies are viewed as lacking a clear basis of value, exhibiting extreme price volatility, and fostering a speculative atmosphere, which can easily lead to financial losses and pose a potential threat to financial stability.
- Combating Illegal Activities: Virtual currencies are increasingly being used for criminal activities such as money laundering, drug trafficking, smuggling, and illegal fundraising, which disrupt economic and financial order.
- Protection of Investor Interests: To maximize the protection of user interests and prevent financial losses resulting from virtual currency transactions.
Although the Chinese government maintains a cautious stance toward virtual currency trading, it remains open to the research and development of blockchain technology, emphasizing the distinction between virtual currencies and blockchain technology itself.
Investment Risk Warning
The cryptocurrency market is highly volatile and complex. Investors should fully understand the potential risks and comply with the laws and regulations of their respective jurisdictions when engaging in any cryptocurrency-related activities. This article is intended to review historical events and industry developments and does not constitute any investment advice.
