Different governments have different regulations pertaining to cryptocurrency and crypto exchanges are expected to comply with these rules. In some cases, exchanges find themselves having to geo block traders from a particular country or close accounts belonging to traders from said country.
This is the case with the latest developments surrounding online trading major IG Group Holdings. The group announced that they will be closing all accounts belonging to Chinese nationals. The accounts will be fully closed by the end of July 2019. The announcement came through the company’s preliminary results for the year to May 31 which also came with a regulatory update report.
According to the trading group, the closing of accounts belonging to Chinese nationals has come after a request was made by the Chinese State Administration of Foreign Exchange to the Australian Securities and Investments Commission (ASIC). The request put forward asked that all CFD providers licensed by the regulator prevent Chinese nationals from engaging in trades through their platforms. IG Group accepted the request and new trades from Chinese nationals were stopped in June 2019.
The request to stop Chinese nationals from trading on IG Group will be a huge blow to the business of the trading platform. In the 2018/2019 financial year, Chinese residents trading on IG’s Australian platform generated £2.7 million in revenue for the exchange.
ASIC is expected to commence a consultation process pertaining to potential measures they may want to apply to the CFD industry. IG Group expects that the measures ASIC comes up with will include leverage restrictions that will apply to retail clients. Clients who are categorized as wholesale clients will be excluded from these regulations.
Chinese traders being blocked from trading platforms
Chinese traders have found themselves being cut off from different exchanges over the last few months as the government seeks to clamp down on trading. In May, KVB Kunlun Financial Group LTD said that it received a letter from the ASIC dated April 12, 2019. The letter carried a reminder that all exchanges licensed under the ASIC were required to observe and comply with applicable laws in any foreign jurisdictions they might engage in business.
Licensed trading platforms were encouraged to seek legal advice in order to ascertain that they were not in contravention of any laws as they offer their products and services to clients. After the trading platform received the letter, they sought legal advice regarding laws about China.
The result of the legal advice obtained was that the platform conducted a survey to identify any Chinese domestic clients. All clients who are deemed to be from China or who have the potential to be will be blocked from trading on the platform. This trend is expected to continue to more exchanges as Chinese regulatory authorities seek to prevent trading in the country.