GO
Loading...

China tightens restrictions on bitcoin trade

Wednesday, 18 Dec 2013 | 4:30 AM ET

BEIJING, Dec 18 (Reuters) - A Chinese bitcoin exchange platform announced on Wednesday that it had stopped taking Chinese yuan deposits, sending the price of the virtual currency down sharply as China broadened its crackdown on domestic bitcoin trading.

Shanghai-based BTC China, the world's largest bitcoin exchange by volume, posted a notice about the new regulations on its website, two weeks after Beijing banned financial institutions from trading in bitcoin due to the risks involved.

"Due to new government regulations, BTC China will temporarily suspend CNY deposits. BTC deposits/withdrawals and CNY withdrawals are not affected, and will continue to operate in the interim," the BTC China notice said.

It was not immediately clear whether other exchange platforms were affected.

The yuan-bitcoin exchange rate on BT China has dropped 46 percent from Monday, and 60 percent since a peak on Dec. 1. The exchange rate on rival platform FXBTC.com has fallen 70 percent from its Nov. 30 peak.

Over the past two months, bitcoins have seen their value relative to the dollar skyrocket some 800 percent as speculators have piled into the currency, according to bitcoinity.org.

Bitcoin market operators say Chinese nationals are major participants in the market and hold an outsized share of the total number of bitcoins in circulation.

On Tuesday, the Chinese Business News reported that the government had asked third-party payment services to stop handling bitcoin transactions.

Earlier this month, the government issued a statement banning financial institutions from trading in bitcoin due to the risks involved. It did not ban individual trading. 1/8ID: nL4N0JK1KZ 3/8

The statement, which appeared on the website of the People's Bank of China (PBOC), said that the government would act to prevent money laundering risks from bitcoin, which is not backed by a government or central bank.

The PBOC may have cause to be concerned about bitcoins, which are anonymous, untraceable, and can be carried on memory sticks or transmitted electronically, because they represent a potential hole in the country's capital controls.

However, analysts point out that, given the tiny value of the total bitcoins in circulation relative to other currencies, it is unlikely to have much impact on the wider economy.