China may be in the process of shutting down domestic bitcoin exchanges. Details are still unclear how far along authorities are in the decision-making process, but it isn't looking good for cryptocurrencies in the PRC.
China has always had an uneasy relationship with the burgeoning economic idea of cryptocurrencies. Rumours suggest Chinese authorities believe virtual currencies are creating "too much disorder." For an authoritarian government like China’s, the idea of money going in and out of the country that it can’t control is fear inducing. Last year many Chinese investors were selling Yuan in favor of Bitcoin.
Bitcoin drops below $4,000
If China does shut down the exchanges, it may slow the rapid growth of bitcoin, and would undoubtedly cause other currencies like Ethereum to feel the pinch. The rumors of the news already caused a dip in Bitcoin value.
As the news is yet to be confirmed, many in the industry are not convinced that the decision will actually be followed through. Bobby Lee, co-founder and CEO of BTCC tweeted out a poll on September 8th, asking his followers if they believed the rumors of the shutdown to be true or false. 83 percent of the respondents believed that the news was fake.
BTCC is the world's second largest Bitcoin exchange. It was also China's first bitcoin exchange, and most of its customer base are Chinese. OkCoin, another Chinese Bitcoin exchange, and the largest in the world responded to the news with an email saying, “Till now we haven't informed by any authorities about closing BTC exchanges, if that happens we will show notifications on our website in no time. Even if that's the case, we would be running offline trading for users, and your balance of coins in your account will be absolutely safe.”
China was never a fan of cryptocurrencies
China does have a history of ruling tough against Bitcoin. In 2013, China banned the virtual currency from financial institutions and banks but at that time left the exchanges alone. The three big Chinese exchanges, Bitfinex, OkCoin, and BTCC currently make up about 45 percent of the global market share of bitcoin. The growing strength of these exchanges may have been what triggered this rumored decision. If the decision does go ahead, it doesn’t mean that bitcoin trading in China will stop altogether. Chinese exchanges are likely to already be making plans to continue trading. One viable option would be to move away from the possibly banned centralized exchange services and instead focus on peer-to-peer trading instead.
Huboi and OkCoin have said they would cooperate with any decision made by financial authorities but would refocus their company’s energies into facilitating peer-to-peer trades between individuals buying and selling cryptocurrency. “Bitcoin and peer-to-peer trades are not illegal,” reads OKCoin’s statement (in Chinese). The other option the firms may consider is to just move the bulk of their operations out of China. It is likely most of these large Chinese companies will become more international in the future. While the future of bitcoin in China remains uncertain cryptocurrencies as a whole are still in a position of strength.