BITCOIN SLUMPS ON CHINA TRADING BAN
But country’s largest exchanges say awaiting clarification
CHINA plans to ban trading of bitcoin and other virtual currencies on domestic exchanges, dealing another blow to the US$150 billion (RM630 billion) cryptocurrency market after the country outlawed initial coin offerings last week.
The ban would only apply to trading of cryptocurrencies on exchanges, according to people familiar with the matter. Authorities didn’t have plans to stop over-the-counter transactions, said the people.
Bitcoin slumped on Friday after Caixin magazine reported China’s plans, capping the virtual currency’s biggest weekly retreat in nearly two months.
The country accounts for about 23 per cent of bitcoin trades and is also home to many of the world’s biggest bitcoin miners, who use vast amounts of computing power to confirm transactions in the digital currency.
“Trading volume would definitely shrink,” said FBG Capital founding partner Zhou Shuoji, which invested in cryptocurrencies.
“Old users will definitely still trade, but the entry threshold for new users is now very high. This will definitely slow the development of cryptocurrencies in China.”
While Beijing’s motivation for the exchange ban is unclear, it comes amid a broad clampdown on financial risk in the run-up to a key Communist Party leadership reshuffle next month.
Bitcoin has jumped about 600 per cent in US dollar terms over the past year, fuelling concerns of a bubble. The People’s Bank of China has done trial runs of its own prototype cryptocurrency, taking it a step closer to being the first major central bank to issue digital money.
“There has been a general tightening of the screw on regulating financial and monetary conditions,” said Union Bancaire Privee SA HK chief economist Mark McFarland.
But China’s largest bitcoin exchanges said yesterday they were still awaiting clarification from the government following more media reports that Beijing was planning to ban trading of virtual currencies on domestic exchanges.
Suning Financial Research Institute director Xue Hongyan, said: “The reason is not difficult to understand. The virtual currency itself is not the problem, but the illegal behaviours that the virtual currencies enable are where the problems lie”. Agencies