Bitcoin News – China

China closes in on bitcoin

Chinese bitcoin trading platforms risk closure if they breach new virtual currency “money laundering” controls as Beijing steps up efforts to curb the flow of capital offshore

 

Chinese bitcoin trading platforms risk closure if they breach new controls on the virtual currency, the central bank said Thursday, as authorities step up efforts to curb the flow of money offshore.

During a meeting Wednesday with officials from nine Beijing-based bitcoin trading platforms, a People’s Bank of China (PBoC) inspection team unveiled a series of restrictions on the digital unit.

The PBoC said it has banned the platforms from margin trading, a widespread practice that allows investors to go into debt to buy bitcoin and repay their loans with gains made by the currency.

Trading platforms are also forbidden from “money laundering” and practices that “would violate foreign exchange or tax laws” — those that do risk closure by the authorities.

The strong depreciation of the yuan against the dollar and concerns over the weakening economy are prompting investors to move their capital out of China into safer and more lucrative investments.

To curb the massive capital flight, estimated at $700 billion in 2016, Beijing has launched drastic measures including tightening controls on individuals’ foreign currency purchases — cited as driving bitcoin demand.

The PBoC had already dispatched inspection teams to several of the country’s major bitcoin trading platforms in mid January.

The Bitcoin Price index, an average of the major exchanges, dropped by nearly four percent Wednesday, before rebounding Thursday to end slightly below its recent high of $1.130 at the beginning of January.

The crackdown by the PBoC will have ramifications outside China given that the three main Chinese trading platforms — BTC China, Okcoin and Huobi — account for around 98.4 percent of global trade in bitcoin, according to market tracking website bitcoinity.org.

Writing on popular messaging app WeChat, BTC China said Thursday it would “strengthen controls on the identification (of its users) and provenance of funds”.

“BTC China will take appropriate action against accounts carrying out suspicious transactions, including restricting or freezing trade, while notifying the relevant authorities,” it added.

Tian Jia, a Beijing-based trader of bitcoin, said “there are a lot of people shorting bitcoin now, one because of the regulatory environment, another because the price is relatively high”.

“The fact that PBoC continues to look into this issue might make people think that the whole thing isn’t over.” Boosted by capital flight, Chinese demand for virtual currency has exploded in recent months.

On BTC China, the world’s biggest platform for buying or selling bitcoins, the daily trading volume soared to 28 billion yuan in December ($4 billion), compared to around 1 billion yuan three months earlier — while the price of the bitcoin in yuan has climbed 70 percent.


Bitcoin drops by $100 as China’s central bank corrals the market

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Chinese bitcoin exchanges have disabled withdrawals of the cryptocurrency after meeting with the People’s Bank of China, indicating the central bank has stepped up its efforts to regulate the market.

Throughout January, the PBoC made announcements that it was looking into bitcoin, including setting up a task force to carry out inspections and ensure bitcoin exchanges had implemented anti-money laundering systems.

Then on Thursday, the central bank announced it had met with nine exchanges to warn them they would be closed if they violated regulations. This prompted the three main Chinese bitcoin exchanges, BTCC, Houbi and OKCoin to temporarily disable bitcoin withdrawal (users can deposit and withdraw yuan but not bitcoins) for the next 30 days, while they improve their anti-money laundering systems and customer identification measures.

The news caused the price for bitcoin to drop sharply on Thursday, from near a one-month high of around $1063 to as low as $954. Bitcoin prices recovered marginally, and are currently trading around $964.

Despite the hit to prices, bitcoin analysts believe the move by the PBoC will be healthy for the market.

“The PBoC moves to regulate Bitcoin more stringently will bring short term woes but will ultimately strengthen the ecosystem,” Charles Hayter, chief executive and founder of digital currency comparison website CryptoCompare, told CNBC via email.

The moves by the PBoC and the improved systems will add respectability and rigor to the bitcoin market, according to Hayter.

These measures, along with the introduction of standard trading fees by Chinese exchanges, should also slow down the volume of bitcoin trading across China, which had become a cause for concern.

According to CryptoCompare data, trading volumes on Chinese exchanges have fallen from 10 million bitcoins per day to a range of 30,000 to 90,000. Bitcoin-yuan trades made up 98 percent of market share, but this is now around 26 percent, behind bitcoin-dollar and bitcoin-yen pairs.

“This has been a long time coming and many in the industry view these developments as a positive clean up. We already see liquidity resettling in other trading pairs like BTC/JPY & BTC/USD,” Fran Strajnar, co-founder & CEO of data and research company Brave New Coin, told CNBC via email.

“These marketplace changes will inevitably slow nefarious activity and open channels to more and more institutional investors. In my opinion the ‘PBoC cleanup’ is the best thing that could have happened to bitcoin this year.”

Source:

http://www.cnbc.com/2017/02/10/bitcoin-drops-by-100-as-chinas-central-bank-corrals-the-market.html

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