Here’s (Most of) What Has Happened to Bitcoin in China So Far...

Here’s (Most of) What Has Happened to Bitcoin in China So Far in 2017

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2017 for bitcoin has already been dizzying. The price broke $1,000 on January 1 and, last week, it broke through an all-time high. The price gains have come as a flurry of events in China, where the digital currency is defined as a ‘virtual good’, have left the Bitcoin scene there in disarray. 

Related: The Butterfly Effect of Bitcoin’s Exchange Regulations

2017

Here's (Most of) What Has Happened to Bitcoin in China so far in 2017

On January 5, the People’s Bank of China (PBoC) spoke with bitcoin exchanges informing them that bitcoin is still not a currency under Chinese laws. Rumors abounded that China would soon act to ban Bitcoin, a nation where the majority of the digital currency is generated via its mining process.

A milder interpretation of the action surmised the central bank was simply clarifying the nation’s laws – no offline promotion, no fake trades, devaluation of the yuan can’t be mentioned to promote digital currency, and they reiterated mandatory know your customer and anti-money laundering laws, among other conditions. PBoC also took this opportunity to warn investors about the digital currency’s volatility and risk.

On January 11, People’s Daily, China’s official paper, published a story on blockchain technology which included a graphic explaining Bitcoin.

Then Came Inspections

The PBoC Shanghai and the Shanghai Municipal Finance Office were already inspecting popular Bitcoin service provider and exchange, BTCC. The two authorities then inspected bitcoin exchanges Huobi and OKcoin. The latter stated in a customer service email:

“[Authorities] are conducting a one-week long inspection, only to understand the situation here. The purpose is to maintain financial stability, prevent financial risks, and regulate market trading behavior”, the Chinese exchange wrote. “No other intentions. The deposit and withdraw services are functioning properly”.

BTCC shared similar sentiments. “All good, just inspections”, the exchange tweeted. “A group of regulators consisting of the [Shanghai] branch of PBOC, the [Shanghai] Financial Affairs office & other related govt agencies visited BTCC”.

Among other things, the Chinese exchanges would have to cease zero-fee margins trading in bitcoin. In the Bitcoin Community, a discussion concerning a large percentage of the trades in China were being faked by exchanges increased during these events. BTCC then suspended its bitcoin margin loan service. Huobi and OKCoin also suspended margin trading.

On January 20, BTCC tweeted that it was “reviewing the operating experience of foreign counterparts and the charging of transaction fees, aiming to further curb speculation and prevent violent price fluctuation”. OKCoin announced it was taking similar actions.

BTCC, Huobi and OKCoin introduced fees on or around January 24. A fourth Chinese bitcoin exchange, Yunbi, introduced fees shortly thereafter.

PBoC Releases Statement Acknowledging Inspections of Chinese Bitcoin Exchanges

“PBoC Department of Business Management, Beijing Municipal Bureau of Finance, Municipal Bureau of Industry and Commerce and other relevant departments formed a joint group to enter Huobi, OKCoin and other bitcoin exchanges for an on-site inspection”, the statement reads. “According to problems found during the initial inspection, the group decided to continue the inspection mainly focusing on payment settlement, anti-money laundering, foreign currency management, information and financial security. The inspection group suggests that investors should pay attention to important aspects of bitcoin exchanges, such as legal compliance, market volatility, financial security and other risks, and participation in bitcoin investment with discretion”.

As the Lunar New Year approached in China, the PBoC announced it would start its own digital currency research institute to research blockchain technology.

PBoC then invited nine Chinese bitcoin exchanges to a closed door meeting, including CHBTC, BTCTrade, HaoBTC and Yunbi, to reportedly emphasize no margin trading and that the exchanges must comply with AML laws.

PBoC, sometimes called “Central Mom” in China, had elicited a response. OKCoin, Huobi and BTCC all announced the day after the meeting that they wound strengthen AML and KYC procedures.

China-based Bitcoin twitter account and news source, CnLedger, tweeted the following day: “BTCC, OKCoin, Huobi: will upgrade AML system according to laws & regulations, pausing BTC LTC withdraw during the upgrade. Estimated time: 1 month”.

Chinese Exchanges Pause Withdrawals

On February 13, Bitcoin service provider HaoBTC announced it would cease bitcoin exchange services but maintain others like its wallet service.

Here's (Most of) What Has Happened to Bitcoin in China so far in 2017

Localbitcoins, a peer-to-peer bitcoin trading platform, showed an explosion in interest following the PBoC actions and subsequent suspension of withdrawals on Chinese exchanges.

Here's (Most of) What Has Happened to Bitcoin in China so far in 2017

On February 8, Samson Mow, CEO of BTCC, left the company he helped to found. Little explanation was given. “We are sorry to inform you that our COO [Samson Mow] is leaving BTCChina”, wrote co-founder Bobby Lee.

Trading volumes by then had started to dwindle. OKCoin, which held the largest amount of bitcoin futures, saw its volume drop by more than 20,000 bitcoins from February 16-17.

Since the meetings with PBoC, exchanges in China have begun to phase-in new AML and KYC procedures, such as ID uploads and other verification processes – neither of which existed before the recent meetings.

Then There Was ‘Bityuan’

In the latter half of January, it became public that the PBoC was researching how to implement its own digital currency, RMBCoin, “to truly achieve the goal of money for the people”.

“Now it’s becoming clear that China’s central bank will be one of the first to issue a digital currency”, according to Andy Mukherjee, writing for Bloomberg.

Bloomberg added: “An initial version of bityuan will probably be a tame affair. Research at the People’s Bank of China favors a system where the monetary authority would issue the cryptocurrency to banks, which would supply it to their customers”.

What do you think the future will be for Bitcoin in China? Let us know in the comments below.


Images courtesy of Shutterstock, Bitcoin.com, and Pixabay. 


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  • Martin C

    It is obvious that at this time China is accepting bitcoin and insisting on normal big brother regulation , not that they can prevent any so called money laundering or terrorist financing but they want to be able to track bitcoin and tax it. They are planning on rolling out their own peoples coin …hmmm that’s funny I thought bitcoin was good enough to be the peoples money now we need a central bank of a communist country to issue sound money? What a joke that will be. Only when people have true freedom of choice can their be sound money. Any money that can be endlessly created by banksters is no money at all. Bitcoin is a gigantic threat to the entire global baking cabal, at this point they have the attitude if you can’t beat em join em but I fear that later if the globalists have their way and usher in a one world money system that bitcoin will be severely outlawed. If it is not it will soar to 40k per bitcoin. Even if it is outlawed it will soar in value as it is rare and extremely useful as one can send money instantly, anonymously (pretty much) for very low cost and no banksters or politician demon can stop that from happening. Long live bitcoin. I bought a shitload when they were $10 and I told everyone to buy them but only two persons listened to me

    • Pete Milliet

      Hey Martin, Feel like making a donation to me?

      1GGaSxpMeckmgasuQPxgAXUAHm2ED9u6ys

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    • Frank Beveridge

      Not as big a threat to the banks and economy as ppl think. It can co-exist. Global GDP is around 70 -80 trillion, Derivatives (stocks, IRA, hard assets, etc) market is 10 times that or more. BTC eventually capturing just 1.5% of the available global wealth would make it a $500k coin, give or take. 1.5% is hardly a threat to the banks, when they themselves can make money in the new space, venture funding, the efficiency net gains from DLT adoption, etc. Until then, BTC is often converted back to fiat, so they make money from every transaction. For now they will just be testing our ramparts and regulating to get their teeth into some of it as with everything else.

      • Frank Beveridge

        BTW: If you can have enough vision to look well into the future. Even if BTC reaches 500k or more than 1m, The path will be cleared for them, and Institutional investors, Banks, etc, can easily acquire the remaining BTC at that price or higher. They can either loan it, or hold for appreciation. Long story short, if we can co-exist and get along, it will benefit everyone. Right now the space needs more people, not larger sums. So keep sharing the gospel.