Following a meeting between the People’s Bank of China and representatives of BTC China, OKCoin and Huobi, which in combination account for some 90% of bitcoin trading volumes, BTCC has e-mailed CCN an official statement in reply to our request for comments:
"BTCC regularly meets with the People's Bank of China and we work closely with them to ensure that we are operating in accordance with the laws and regulations of China.
As the longest running exchange in the world, we have always adhered to strict AML/KYC policies and continue to be compliant with all current regulations in China.
The press release put forth from the PBOC today outlines that there is significant volatility in bitcoin trading, and also quoted from a notice released in 2013 saying that bitcoin is a virtual good and doesn’t have legal tender status.
All of our users should be aware of the current policies on virtual goods as well as the risks involved in trading in volatile markets."
PBOC issued a statement today, highlighting concerns in regards to abnormal bitcoin price movements and its responsibility to ensure financial stability. It contains no new measures, repeating a regulatory notice issued in 2013 when bitcoin reached its all-time high across all exchanges.
However, the intervention comes at a sensitive time for both bitcoin’s price, which surpassed gold parity on Chinese exchanges, and yuan’s battle with global foreign exchange markets which have placed bets on its continued devaluation, leading to a Chinese capital flight.
In response, China has enacted a policy of strict capital controls. It seemingly worked for a couple of days when yuan became very scare in offshore markets, leading to its biggest gain in years, but that may have been short lived. Global markets doubled down today with yuan continuing to fall as leading Beijing economists call on the Chinese policy makers to allow the currency to devaluate and Goldman Sachs says “now is the time to sell.”
In the context, some are wondering whether China will take desperate measures and restrict every possible way capital can move, however small. These fears go back to November when a Bloomberg report, which we confirmed was authentic, states:
“China’s regulators are studying measures to limit transactions that use bitcoin to take funds out of the country, according to people familiar with the matter… Officials are considering policies including restricting domestic bitcoin exchanges from moving the cryptocurrency to platforms outside the nation and imposing quotas on the amount of bitcoins that can be sent abroad, the people said.”
We asked BTC China if they are now to take any new measures. We have received no response, but if price is any indication, although it initially panickly reacted, it has seemingly stabilized, suggesting there might not be any underlying change.
One reason might be because China finds itself in a somewhat difficult position. Further restrictive measures may come at a cost to their efforts to attract blockchain technology as most individuals with the necessary skills and talent are very fond of public blockchains. As they are very much sought after due to a significant shortage of skills, it may lead some to choose different options, if PBOC’s attitude is seen as unfriendly to the public blockchain space.
However, in comparison to the trillions that move in global markets as well as China’s huge economy, bitcoin might just be a very small consideration as the situation appears similar to 16 September 1992, when global markets and the British government went head to head. They won then, we’ll have to see who wins now, with bitcoin very much a spectator.
Image from Shutterstock.