The era of free Bitcoin trading in China has officially come to an end, as the country’s three largest cryptocurrency exchanges—Huobi, OKCoin, and BTC China—have resumed withdrawal services after a four-month freeze. This shift marks a pivotal moment in the evolution of China’s digital asset market, driven by intensified regulatory oversight, anti-money laundering (AML) upgrades, and the phasing out of leveraged trading.
Bitcoin prices surged in early June 2017, breaking the 20,000 RMB mark for the first time amid renewed investor confidence. The rally was largely fueled by the resumption of withdrawals, signaling a more stable and regulated environment for traders.
Regulatory Crackdown Sparks Market Transformation
In January 2017, the People’s Bank of China (PBC) launched on-site inspections of major domestic cryptocurrency platforms, citing concerns over money laundering, foreign exchange violations, and pyramid schemes. As a result, all Bitcoin withdrawals were suspended indefinitely.
The freeze left investors unable to access their holdings for months. However, by May 31, 2017, Huobi, OKCoin, and Bitcoin China began gradually restoring withdrawal capabilities—albeit with strict daily limits. For example, OKCoin allowed up to 20 BTC and 200 LTC per day during its trial phase, while Huobi imposed a per-transaction cap of 50 BTC.
These restrictions were part of broader compliance upgrades. Platforms now require full real-name verification and video authentication for withdrawal requests. Users without verified identities are barred from trading or withdrawing funds.
Huobi implemented a comprehensive AML system that includes monitoring suspicious transactions, requesting supplementary documentation, and maintaining permanent audit trails. OKCoin went further by cross-referencing user ID numbers and names with national citizen databases. Suspicious accounts must now provide proof of address, source of funds, and asset verification.
Combating Illicit Use: The Reality of Bitcoin in Money Laundering
While Bitcoin operates on a decentralized, peer-to-peer network—making it resistant to censorship and third-party interference—its pseudonymous nature has made it attractive for illicit activities.
One场外交易商 (OTC trader), who asked to remain anonymous, shared a common scam scenario: fraudsters use social engineering or telecom scams to trick victims into sending money to legitimate Bitcoin sellers. Once payment is received, the seller transfers BTC to the scammer. When the victim reports the crime, law enforcement traces the transaction back to the seller—not the actual perpetrator.
“In this case,” the trader explained, “both the seller and the victim are victims.”
Such cases highlight the urgent need for robust identity verification and transaction monitoring. By integrating government databases and strengthening compliance protocols, exchanges aim to reduce their platforms’ vulnerability to abuse.
End of Leverage: A Safer but Less Speculative Market
One of the most significant changes post-regulation has been the elimination of margin trading and leveraged financing.
Previously, Chinese exchanges offered leverage ranging from 3x to as high as 20x, allowing traders to amplify gains—or losses—with minimal capital. Fees for these services ranged from 0.1% to 0.5%. However, excessive speculation contributed to extreme price volatility and raised systemic risks.
After regulatory scrutiny revealed non-compliant financing practices at Huobi, OKCoin, and Bitcoin China, all three platforms discontinued leveraged services.
“A trader told me he used 5x and even 20x leverage before,” reported an industry source. “With 20x, even small price swings could trigger a margin call. Now that leverage is gone, I don’t have to watch the charts nonstop. It’s much less stressful.”
All three major exchanges now charge a flat 0.2% fee on transactions—officially ending the era of zero-commission Bitcoin trading in China.
Japan and South Korea: The New Hubs of Crypto Activity
While China tightens regulations, Japan and South Korea have emerged as leading markets for Bitcoin trading.
Japan officially recognized Bitcoin as legal tender in April 2017, prompting widespread adoption among merchants. Over 4,500 stores accepted Bitcoin by March 2017. Meanwhile, South Korean investors—concerned about currency depreciation and capital controls—have flocked to digital assets as an alternative store of value.
Unlike China, Japanese retail investors can access leverage of 50x to 100x through domestic platforms. This aggressive speculation has driven up local Bitcoin prices, which at times exceeded the global average by over $300.
According to data from CryptoCompare, Japan and South Korea together accounted for 48.6% of global Bitcoin trading volume by June 2017. In terms of denomination, yen-based Bitcoin trades led the world with a 30.8% share, followed closely by USD at 30.6%, while RMB-denominated trades dropped to 16.8%.
Experts attribute Japan’s crypto boom to supportive policies, including regulatory oversight by the Financial Services Agency (FSA) and plans by Mitsubishi UFJ Financial Group to launch a digital currency platform.
Toward a “Regulatory Sandbox” Approach
Despite tighter controls, there is growing discussion about how to balance innovation with investor protection.
Central University of Finance and Economics professor Ying Zhanyu emphasized two key issues: defining Bitcoin’s legal status and clarifying risk responsibility. While Bitcoin is not considered legal tender under Chinese law—it’s classified as a “virtual commodity”—individuals retain the right to participate at their own risk.
In 2013, five Chinese government agencies issued a joint statement stating that Bitcoin lacks legal tender status and should not circulate as currency. However,姚前 (Yao Qian), then Deputy Director of the PBC’s Technology Department and head of its Digital Currency Research Institute, proposed reclassifying Bitcoin as a “quasi-digital currency,” acknowledging its technological value while distinguishing it from state-backed digital currencies.
Yao advocated for a “sandbox-style” regulatory model—a controlled environment where fintech innovations can be tested under relaxed rules while safeguarding consumers. This approach allows regulators to observe market behavior without stifling innovation.
Frequently Asked Questions (FAQ)
Q: Why did Chinese exchanges stop offering free Bitcoin trading?
A: To comply with new regulatory requirements and build sustainable business models post-crackdown, exchanges introduced a standard 0.2% transaction fee, ending years of zero-commission trading.
Q: Can I still withdraw Bitcoin from Chinese exchanges today?
A: Yes—but only after completing strict KYC (Know Your Customer) procedures including real-name verification and video authentication. Daily withdrawal limits may also apply during initial phases.
Q: Is Bitcoin legal in China?
A: Bitcoin is not illegal to own or trade privately, but it is not recognized as legal tender. Financial institutions are prohibited from handling Bitcoin transactions.
Q: Why are Japanese and Korean markets so influential in Bitcoin pricing?
A: Due to high retail participation, favorable regulations (in Japan), capital flow restrictions (in Korea), and access to high-leverage trading—factors that amplify demand and create price premiums.
Q: What is a “regulatory sandbox” in fintech?
A: It’s a framework set up by regulators that allows startups and financial firms to test innovative products in a live environment under supervision, with adjusted rules to manage risk.
Q: How has the removal of leverage affected Chinese traders?
A: It has reduced market volatility and speculative frenzy, leading to more stable trading conditions—even if some traders miss the high-risk, high-reward opportunities.
The transformation of China’s cryptocurrency landscape reflects a broader global trend: regulation over recklessness. As markets mature, security, transparency, and compliance take precedence over unchecked growth.