China’s three biggest bitcoin exchanges took steps to prevent withdrawals of the cryptocurrency amid pressure from the nation’s central bank to clamp down on capital outflows.
BTC China subjected all bitcoin withdrawals to a 72-hour review, while Huobi and OKCoin suspended them completely, the three venues said in separate statements on Thursday. They all said the measures were in response to central bank requirements. Conversion to and from the yuan is not affected and the curbs will be dropped after updates to compliance systems, the exchanges said.
The People’s Bank of China told nine bitcoin venues at a meeting in Beijing on Wednesday that it will close exchanges that violate rules on foreign exchange management, money laundering, and payment and settlement.
Chinese authorities are scrutinizing the cryptocurrency amid concerns it’s being used to spirit money out of the country, undermining official efforts to clamp down on capital outflows and prop up the yuan. Demand from investors in Asia’s largest economy, home to most of the world’s bitcoin trades, has fueled a 160 percent rally versus the dollar over the past year.
Huobi and OKCoin said it will take about a month to upgrade systems in line with new PBOC guidelines. BTC China did not give a timing for when any upgrade would be completed.
“The Chinese government is worried about capital flight,” said Arthur Hayes, a former market maker at Citigroup Inc. who now runs BitMEX, a bitcoin derivatives venue in Hong Kong. “Bitcoin is seen as another way to move money out of China, even though most people trade it for onshore capital appreciation and as another asset in their portfolio.”
Bitcoin dropped 7.8 percent on Thursday to $977.39 after the exchange statements. It rose 0.8 percent at 1 p.m. in Hong Kong.
China has taken a central role in the bitcoin market in recent years as its citizens became leading traders and miners, who deploy the vast computing power needed to make transactions with the cryptocurrency possible. Their interest was fueled by the hunt for alternative assets, zero exchange fees and the low cost of electricity to run mining computers. Volume in China took a hit in January after the biggest exchanges started charging transaction fees, deterring automated traders.