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China Plans to Shut Down Bitcoin Exchanges, Allow OTC Trading: Reports

Last Updated March 4, 2021 4:59 PM
Samburaj Das
Last Updated March 4, 2021 4:59 PM

Multiple Monday reports have added to speculation that Chinese authorities are planning to ban bitcoin trading on domestic exchanges, with no plans to stop non-commercial, over-the-counter transactions.

After Friday’s swirling rumors about Chinese regulators reportedly drawing plans to shut down domestic bitcoin exchanges, the Wall Street Journal  is now reporting that China’s central bank is looking to ban Chinese platforms from providing virtual currency trading services.

Citing “people familiar with the matter”, the report claims that the People’s Bank of China (PBoC) – China’s central bank – is leading a draft of instructions to stop commercial bitcoin trading on domestic exchanges.

A separate report by Bloomberg , also citing similar sources familiar with the PBoC’s crackdown on bitcoin activity who ‘asked not to be named because the information is private’, adds that authorities do not have plans to put an end to over-the-counter transactions where trades aren’t dependent on a centralized exchange. “The government also doesn’t have the power to control” non-commercial trading, the WSJ cited a source as saying.

A Consensus to Shut Down Exchanges

The PBoC began its crackdown on domestic bitcoin exchanges in January, putting an end to margin (loan) trading and zero fee trading. Chinese exchanges also paused bitcoin withdrawals for several months.

Today’s WSJ report further adds that Chinese authorities from the central bank, securities and banking regulators as well as other regulatory bodies were considering “various options for months” about regulating the domestic bitcoin trading industry. The ultimate consensus was to shut down virtual currency exchanges in a blanket ban.

“Too much disorder was naturally a basic reason [for the sweeping ban]” said people familiar with the PBoC draft to ban bitcoin exchanges, as cited by the WSJ.

As such, OKCoin, BTC China and Huobi  – China’s big ‘three’ bitcoin exchanges – continue to operate on Monday while insisting that they haven’t received any regulatory notices about a ban on trading of digital currencies from the PBoC.

“The [Ciaxin report ] mentioned that regulators did not declare bitcoin itself as illegal, nor prohibit peer-to-peer (P2P) transactions between users,” read a statement by Huobi on Friday.

Speaking to the WSJ, BTCC chief executive Bobby Lee stated:

We’re still awaiting formal notification from regulators. It’s obviously a sensitive time period.

If the reports prove to be true, China’s move will deal another blow to the overall cryptocurrency market, at least in the short-term. Once the world’s most dominant market with over 90% of the world’s bitcoin trading, China accounted for over a quarter of the world’s bitcoin trading over the last 24 hours.

A week ago, China’s central bank moved to enforce a complete ban on all initial coin offering (ICO) fundraising.

Featured image from Shutterstock.