Vir­tual cash may take flight on un­cer­tainty

China Daily - - BUSINESS - By REN XIAOJIN renx­i­ao­jin@chi­

The pos­si­ble halt to cryp­tocur­rency trad­ing in China and the at­ten­dant un­cer­tainty may prompt lo­cal op­er­a­tors of vir­tual cur­rency sys­tems to go abroad, a se­nior re­searcher said.

On Thurs­day, BTCChina, the coun­try’s big­gest bit­coin ex­change based in Shang­hai, sus­pended trad­ing till Sept 30.

An­other cryp­tocur­rency plat­form Yunbi also an­nounced on Fri­day its sus­pen­sion on Sept 20.

Mar­ket ob­servers said mone­tary reg­u­la­tors will likely en­hance fi­nan­cial risk con­trol mea­sures next.

Af­ter the sus­pen­sion on Thurs­day, bit­coin’s price in China plum­meted 32 per­cent to 17,000 yuan ($2,595) within the first hour. It re­cov­ered some­what to around 18,000 yuan on Fri­day. Some $30 mil­lion evap­o­rated from the value of Ethereum and bit­coin glob­ally by Thurs­day af­ter BTCChina an­nounced the halt.

“The sus­pen­sion of the bit­coin ex­change may lead to a 20 per­cent to 40 per­cent drop in the cryp­tocur­rency’s price lo­cally un­til it re­gains sta­bil­ity,” said Deng Jian­peng, pro­fes­sor of law at the Minzu Uni­ver­sity of China.

“It may also cause bit­coins to flow out of the coun­try while ma­jor (cryp­tocur­rency) ex­changes will also seek op­por­tu­ni­ties to go abroad,” Deng said.

Shortly af­ter BTTChina an­nounced the halt, Chi­nese fi­nan­cial news out­let Yi­cai re­ported that the coun­try plans to shut down all bit­coin ex­changes by the end of this month. Yi­cai cited sources in Shang­hai in its re­port.

Se­cu­ri­ties Times re­ported on Fri­day that ma­jor cryp­tocur­rency ex­changes such as Huobi and OKcoin in Bei­jing have been asked to an­nounce dead­lines for their trad­ing sus­pen­sion.

Deng said China may an­nounce fresh reg­u­la­tions on cryp­tocur­rency trad­ing as over 80 per­cent of the global Bit­coin trade was made through the Chi­nese cur­rency.

If unchecked, this would pose sig­nif­i­cant fi­nan­cial risk in fu­ture, ex­perts said.

Xue Hongyan, di­rec­tor of the Sun­ing Fi­nan­cial Re­search In­sti­tute, said be­fore cryp­tocur­rency could be­come a le­git­i­mate in­vest­ment, it needed suf­fi­cient reg­u­la­tion.

“Cryp­tocur­rency trad­ing in­volves too much risk such as money laun­der­ing and crim­i­nal fi­nanc­ing,” Xue said. “Also, only when su­per­vis­ing au­thor­i­ties are able to track down the vir­tual cur­rency could it pos­si­bly be ac­cepted as an in­vest­ment op­tion.”

The blockchain group Neo, usu­ally re­ferred to as China’s Ethereum, was the first Chi­nese cryp­tocur­rency ex­change that moved out of the Chi­nese main­land.

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