The People’s Bank of China (PBOC) issued a statement on Thursday regarding a meeting it held the previous day with nine Chinese bitcoin exchanges. When the news of the meeting broke, the price of bitcoin dropped almost six percent but quickly regained its high only hours later, and has continued to rise.
PBOC’s Meeting with Nine Bitcoin Exchanges
The PBOC’s statement posted on its website on Thursday states that its Business Management Department was meeting with the main persons in charge of nine bitcoin exchanges on Wednesday. The nine exchanges invited were Chbtc, Btctrade, Haobtc, Yunbi, Yuanbao, BTC100, Jubi, Bitbay and Dahonghuo.
According to a translation of the statement, the central bank informed those
exchanges of existing problems, and potential legal, regulatory, as well as technical risks. The exchanges were subsequently required “not to take part in financial activities such as margin lending or allow money laundering”, Reuters translated.
In addition, they cannot violate laws concerning anti-money laundering (AML), foreign currency payments and management, or violate regulations about taxes and commercial advertisements. Any exchanges that are found to be in serious violation of those requirements can be closed down, the central bank states.
Bitcoin’s Price Proves Resilient
When the news about the meeting broke, roughly a day before the PBOC’s announcement was posted, the price of bitcoin dropped $60 USD on Bitfinex from $1,066 to $1,006 in under an hour. However, it soon rebounded completely, and 19 hours and twenty minutes later, the price had overtaken its previous level.
PBOC Losing Influence over Bitcoin’s Price
There have been three noticeable drops in bitcoin’s price coinciding with the PBOC’s actions this year, each progressively less influential.
The First Drop
The first one started on January 5, when the price of bitcoin was at a three-year high of $1,166 on Bitfinex. The exchange’s all time high was $1,175 on December 1, 2013, and that level has yet to be reached again.
The first of the three price drops took a few days to reach bottom after the PBOC made a pair of statements on its website saying that its officials have met with the heads of BTCChina, Huobi, and OKCoin to discuss their business models and products. No ban was made but the price dropped to $815 over the next day, only rebounding partially before the next piece of PBOC-related news made headlines.
The Second Drop
The second price drop occurred on January 11, when the PBOC launched spot checks on China’s same top three bitcoin exchanges. Some media outlets called the action a “raid,” but BTCChina took to twitter to dispel the myth, and set the story straight.
During the meeting, the price of a bitcoin plunged from $924 to $735, a fall of over 20 percent, rebounding to $790 by the end of the day. In the aftermath, it became known that the Chinese exchanges would have to put an end to their practice of allowing zero-fee and margin trading, both of which are known to artificially boost trading volumes. The three exchanges subsequently confirmed that they had stopped offering margin loans after the discussion with the PBOC.
The Third Drop
The Wednesday drop was far smaller than the previous two and came at a time when the yuan is no longer the currency with the largest bitcoin trading volume. Ever since the January 11 inspections, China’s share of global bitcoin trade has fallen from 99 percent to a mere 33 percent, allowing Japanese yen trading to surpass Chinese trading volumes for the first time.
The nine exchanges mentioned in Thursday’s notice from the PBOC do not include the original three mentioned above. There are also at least 19 bitcoin exchanges trading the yuan with daily volume, including a couple based outside of the country. The PBOC made its intention clear in a January 25 announcement to continue inspecting bitcoin exchanges, so more of these routine meetings could be expected.
How do you think the PBOC’s actions will affect bitcoin’s price going forward? Let us know in the comments section below.
Images courtesy of Shutterstock, PBOC, BTCC, and cryptowat.ch
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