A professor at China's Renmin University explained his explanation of why the organizers of the Chinese pectin exchange platforms closed, and outlined seven main reasons for the decision.
Professor Yang Dong, vice-dean of the Renmin University Law School and director of the Renmin Center for Financial Technology and Internet Security, spoke at several workshops attended by a large number of regulators such as the Bank of China and China Securities Regulatory Commission as well as academic researchers, think tanks and lawyers. In an interview with CCTV, the professor offered a series of explanations on why regulators in China are closing down digital exchange platforms, China Finance Daily reported on Friday.
No license
The first point he raised concerns licensing. He said that financial institutions should obtain licenses to do business such as the China Banking Regulatory Commission and the China Insurance Regulatory Commission (CIRC). He pointed out that:
"At present, China's local digital currency platforms lack the relevant legal licenses, which makes these platforms free from any existing regulatory system, so investing in such platforms carries significant trade risks.
Nature of Pitcairn
The second point raised by the professor was with regard to the nature of the currency itself. "The mechanism of limiting the amount of money encoded by a particular code is controversial," said Professor Yang, referring to how to "invent a new encryption system so that the existing algorithm can be tampered with, which may also increase the encoded funds." In addition, To a sharp fluctuation in the prices of BTC. "Because there are no economic fundamentals to assess the supply and demand of the currency and its intrinsic value, the speculative climate in the market is causing sharp fluctuations in the price of this currency," he said. The direction of prices in a deliberate manner, this would cause heavy losses. Moreover, he said that digital currencies "are not affected by the driving force of inflation and exchange rate differentials, as well as other issues."
Money laundering and pyramid schemes
The third point of the professor focused on how to use digital currency transactions for money laundering and financial fraud, as well as to avoid foreign exchange controls. Where he said:
"Because the digital currency is limitless, international payments through the digital currency can avoid foreign exchange controls, so there is a greater need to protect against these unknown transactions for countries and economies where capital projects are not fully open."
Then proceed with the next point, pointing out that some pyramid schemes and fraudulent activities also benefit from digital currencies.
Market manipulation and security concerns
Professor Yang pointed out in the fifth point to market manipulation. He explained this point by saying that anyone who invests tens of millions of dollars will be able to easily manipulate the currency and send it to rising heights. This would cause losses to ordinary investors who do not have enough information and are in a loss.
As for the sixth point, it involves security risks. "Data risks and information security risks are intertwined," he said. He added that if the security system is not strong enough, the pirates will be able to access the currencies of the Bitcoin, which will lead to a significant loss of data on exchange platforms, and thus cause irreparable damage.
Dark Internet Transactions
The last point is the use of the Bitcoin coin in dark internet markets, which have not yet been effectively organized, the professor said. Where he described it as saying:
"Dark Internet transactions occur without any strict safeguards, so anti-money laundering will not be implemented effectively, since KYC and other effective measures are also aimed at allowing anonymous transactions. In addition, the government can not effectively monitor security vulnerabilities in the black network. "