Bitcoin under scrutiny by the PBOC
January 16, 2017 Category Finance, Weekly
The People’s Bank of China (PBOC) has launched spot checks on leading Bitcoin exchanges in Beijing and Shanghai, causing the price of the cryptocurrency to drop against the U.S. dollar. The central bank said its probe of Bitcoin exchanges BTCC, Huobi and OKCoin was to look into possible rule violations, including market manipulation, money laundering and unauthorized financing. Chinese authorities have stepped up efforts to monitor capital outflows and relieve pressure on the yuan. While the yuan lost more than 6.5% against the dollar last year, its worst performance since 1994, the Bitcoin price has soared to near-record highs. Some analysts say Bitcoin has become an attractive option for tech-savvy Chinese to hedge against a drop in the yuan’s exchange rate and skirt around rules limiting how much foreign exchange individuals can buy each year. Trading between the yuan and Bitcoin accounted for around 98% of the total market in the past six months, according to Charles Hayter, CEO of digital currency analytics firm Cryptocompare. Bobby Lee, CEO of Shanghai-based BTCC, said the exchange was “in compliance with all the current rules and regulations of running a Bitcoin exchange in China”. Among the 16 million bitcoins already dug out across the world by now, there are around 4 to 5 million held by Chinese citizens.
The Chinese authorities are mulling whether to introduce third-party custodian services to oversee the world’s largest bitcoin market, after its rapid expansion and a recent sharp price fall highlighted the potential threat it poses to the stability of financial markets. Some bitcoin platforms crashed during the recent market volatilities, causing some investors to bear huge losses because they were unable to log on to the exchange’s website during the sell-off. Setting up third-party custodian platforms would improve trading security.
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