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December 18, 2013, 07:55:55 AM |
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The article:
China has blocked the country’s Bitcoin exchanges from accepting new inflows of cash, a move that imperils the much-hyped virtual currency in its biggest market.
The head of BTCChina, the world’s largest Bitcoin exchange by trading volume, said he had received word at midday on Wednesday that his platform would no longer be able to accept renminbi from would-be Bitcoin buyers.
“As of right now, we have received notice from our third-party payment company that they will disallow customers from making deposits into our exchange,” Bobby Lee, a former Yahoo developer who co-founded BTCChina earlier this year, told the Financial Times.
As of early afternoon the Bitcoin price in China had fallen more than 25 per cent on the day to Rmb2,800 ($461) per unit. It has been a rollercoaster ride for the virtual currency, which soared as high as Rmb7395 per unit in early December, up some 50-fold since the start of the year.
With its booming market for commerce, China had been seen by Bitcoin enthusiasts as fertile ground for the virtual currency. However, regulators were concerned that people could use Bitcoins to skirt the country’s capital controls. They also grew alarmed at the rampant speculative demand for Bitcoins, warning it had the makings of a bubble.
The Chinese central bank took a hard line two weeks ago, banning the country’s financial institutions from handling Bitcoin transactions.
Although the People’s Bank of China said individuals were still free to trade it at their own risk, the ban on third-party payment service providers from doing Bitcoin business effectively makes new purchases of the virtual currency impossible.
“I’m not that surprised,” said Hong Hao, chief China strategist at Bank of Communications. “Even if the amount of Bitcoin in circulation wasn’t that large yet, it was a potential threat to the monetary system.”
Mr Lee of BTCChina said the emphasis of the notice was on deposits, meaning that customers with existing renminbi balances would still be able to withdraw their cash from the exchange. “They are completely safe,” he said, adding that people with money already deposited on the exchange still had the option of buying Bitcoins.
The China Business News, a local financial newspaper, reported on Tuesday that the PBoC had this week ordered third-party payment service providers to stop offering clearing services to online Bitcoin exchanges in China, and had until the end of January to terminate their payment relationship.
That had already started to weigh on prices, making Bitcoins about 15 per cent cheaper in China than elsewhere in the world as of earlier today. Just a month ago, Bitcoins were 30 per cent more expensive in China thanks to surging local demand. China’s capital controls mean it takes time for investors to arbitrage the difference between prices in and outside the country.
Additional reporting by Emma Dong
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