Bitcoin in China: Summary of the latest developments
Over the last couple weeks, the âBitcoin situationâ has changed dramatically in China, the worldâs leading power in both Bitcoin trading volume and network hashrate. Following the intervention from the countryâs central bank, the Peopleâs Bank of China, exchanges were forced to change their policies dramatically. Today we want to bring you up to speed on the recent events that have stemmed from the East.
Following Bitcoinâs latest rally which reached its height in the CNY market on the third of January. This jetpacked rise led Chinese regulators to explore how Bitcoin was being used to circumvent capital flight restrictions that are predominant in the country.
The Peopleâs Bank of China then met with domestic Bitcoin exchange operators to warn them about restrictions on how the exchanges could seek to acquire new customers, prohibiting the mention of the ongoing devaluation of the Chinese Yuan in promotion or marketing campaigns.
This was followed by an official warning issued on the 6th of January by the Peopleâs Bank of China regarding the use of Bitcoin as a currency. The warning reads:
“Bitcoin is a specific virtual good and does not have the same legal status as a currency, as so it can not and should not be used as money in the market circulation. Participating institutions and individuals should carefully engage in activities such as Bitcoin investment and bear the corresponding responsibilities and risks.”
Five days later (on the 11th of January), another statement was issued by the Shanghai branch of the Peopleâs Bank of China. This time, however, the bank decided to take a more invasive stance by creating a task force to conduct inspections on domestic exchanges, BTCC, Huobi and OKcoin.
Since then, no updates have been issued by the PBoC. However, the exchanges have been taking steps towards what seems to be the requests or commands from the Peopleâs Bank of China.
The following day, exchanges in the country halted margin trading services. The first of which was BTCC, posting the following announcement on its home page:
âStarting from January 12th, 2017, BTCChina has suspended margin loan service. If you have any questions, please contact Customer Service.â
Since then, all three exchanges have officially stated that they are no longer offering margin loan services to customers, which at the time decreased the trading volume substantially in the course of a few days. However, until then, China still held a large majority of the global trading volume
Now, following the announcements made on the 22nd of January, all three exchanges have implemented trading fees of 0.2% both for makers and takers. BTCC apllied the measure on the 24th.
Now, the country that held over 90% of the market share of trading volume in the world has been reduced to less than 30%, leaving the U.S to lead the market in terms of volume. UK-based exchange, Coinfloor has taken a step in the opposite direction and introduced zero trading fees on its platform.
Although these changes have sent the Bitcoin price on a wild rollercoaster ride and have reduced trading volume substantially, they are welcome in the Bitcoin ecosystem. The zero-fee policies employed by these exchanges created an artificially inflated trading volume in the country, which combined with the panic sells of margin loans caused unusual volatility in the market.
Now, we can rely on a more distributed Bitcoin, when it comes to its value. No longer will the events in China have a devastating effect on the global market.
The intervention from the Peopleâs Bank of China, although sudden, can be looked upon positively. It means that governments are not looking to ban the cryptocurrency, but rather to implement it in their economy.