Major Chinese bitcoin exchanges halt withdrawals after crackdown
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China's two largest bitcoin exchanges halted withdrawals of the virtual currency after the country’s central bank met with a group of exchange executives to warn them about the need to enforce rules on money-laundering and foreign exchange.
The ban on withdrawals comes after weeks of increased scrutiny surrounding bitcoin amid concerns that the digital currency could be used to facilitate capital flight. Renminbi exchanges accounted for 98 per cent of global bitcoin trading during the past six months, according to data from Bitcoinity.
In principle, buying bitcoins on Chinese exchanges then selling them on foreign exchanges could allow investors to skirt official limits on converting renminbi to foreign currency. In practice, industry experts say that poor liquidity and gaps between bitcoin prices on Chinese and foreign exchanges make large-scale fund transfers via bitcoin difficult, risky and expensive.
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Still, Chinese authorities are leaving no stone unturned in their wide-ranging battle against capital outflows. The People's Bank of China (PBoC) met with nine bitcoin exchanges on Thursday and instructed them to abide strictly by relevant regulations, according to a bank statement on Thursday. It warned that if "serious violations" were discovered, the platforms would be shut down.
In nearly identical statements late on Thursday, OKCoin and Huobi.com, the two largest exchanges by trading volume during the past six months, announced that they were halting bitcoin withdrawals from their platforms. Meanwhile, BTC China, the third-largest platform, said it would enforce a 72-hour review period for withdrawals.
All three platforms said they would upgrade their systems in order to "prevent and attack the exploitation of bitcoin for money laundering, foreign exchange conversion, pyramid schemes and other illegal behaviour” OKCoin and Huobi estimated the upgrades would take one month to complete. While bitcoins now cannot be withdrawn from those platforms, users can still sell their bitcoins and withdraw the proceeds in renminbi.