China’s exchange ban starts closing services

Luke Parker , 16 Sep 2017 - BitcoinChinaExchange

September has been a wild ride for Bitcoin, echoing January 2017 as a month dominated by news driven by the Chinese government.  

The current round of announcements began on the Sept 4, when the government made the sale and trading of ICO tokens illegal across China. Many of these digital assets were traded on bitcoin exchanges.

Exchanges in the country have since purged any ICO-related products, while maintaining cryptocurrency trading services. However, some rumors about cryptocurrencies themselves being banned arose.

On the 9th of September a mainstream financial news report from Caixin announced that the top three Bitcoin exchanges in China would be closed down, in an article titled “The end of the virtual currency exchange era.” The article did not name any sources, and at the time the three exchanges said that they had received no such orders.

Soon after the article was published, the official twitter account of the Chinese Communist Party posted a comment that appeared to confirm the news.

- People's Daily

Over the past few days, however, a number of bitcoin exchanges in the country announced a halt of yuan trading. BitKan made the first announcement, on the 12th, stating “Our OTC trading function is suspended; the money inside of the wallets can still be used normally, accepting digital assets both into and out of the affected accounts like normal.” The exchange revealed that the suspension was “in response to relevant management measures.”

These measures were put forward by a long list of government departments, the exchange explains, including “the People's Bank of China, the Central Committee of the People's Republic of China, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the China Banking Regulatory Commission, the CSRC and the CIRC.”

Top-five Chinese bitcoin exchange company BTCC then announced the closure of its subsidiary BTC China, the oldest Bitcoin exchange still in operation today. The company tweeted their first announcement early on Thursday, stating that it would completely shut down its exchange businesses on the last day of the month. A follow-up statement by the company Friday on Reddit offered more details.

- BTCC

BTC China, which encompasses a range of yuan-to-cryptocurrency trading pairs, did not state if the shutdown was permanent. Other businesses that the company runs, including a mining pool, physical bitcoin line of products, and an international cryptocurrency exchange will continue to operate normally.

BTCC also made it clear that the decision for the shut-down was based upon the government’s latest statement made on the 4th, which was targeting ICOs.

On Friday, the two largest Chinese cryptocurrency exchanges, OKCoin and Huobi, each made announcements, at roughly the same time. In similarly-worded statements. Both companies posted announcements on their respective sites, clarifying that they would each close the yuan trading part of their business as of October 30, and encouraged all customers to withdraw their fiat currencies as soon as possible.

While users were not told that they had to remove their cryptocurrencies, for those who have bought cryptocurrency with fiat already, the exchanges were adamant about customers completing a video interview for AML/KYC purposes first before withdrawing. Both letters gave similar reasons for the closure of service, and neither gave any hints as to when or if they might re-open.

“Because the regulatory authorities did not declare bitcoin a currency and digital assets as illegal, [we] will actively explore and strive for, and continue to provide Chinese users with compliant digital asset services.”

- Huobi and OKCoin

The exchange and mining pool that championed the August 1 bitcoin fork, creating the cryptocurrency called Bitcoin Cash (BCH), is the latest to announce their exchange’s closure.

ViaBTC announced the closure of its exchange platform on the 15th. while the companies mining pool will remain in operation. The company briefly explained that their exchange’s website “will be officially closed in Mainland China,” without going into more detail.

The Chinese Yuan (CNY) has been the third largest market for bitcoin trading volume, for most of 2017. Between 17 and 23 percent of all bitcoins traded for any fiat currency have been traded for CNY. As bitcoin exchanges in the country close up shop for yuan trading, that percentage will drop sharply.

As the ban on trading all cryptocurrencies for yuan becomes realized across the country, many of China’s bitcoin miners, which account for at least two-thirds of the total bitcoin mining hashpower globally, could find themselves without a way to sell their bitcoin.

The miners, including leading mining pool and chip manufacturer Bitmain, typically need to sell their mined bitcoins for yuan in order to pay their electricity bills and upgrade their mining equipment. It has yet to be revealed how they plan to legally acquire yuan in the future.

Bitcoin traders, however, are well acclimated to China’s government making announcements that threaten to ban bitcoin in some form. Similar statements from the PRC have occurred since 2013. Now that the exchanges are closing yuan trading, many bitcoin users see it as a stabilizing force that will lower bitcoin’s famously high volatility.

- Charlie Lee, Litecoin Creator