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China central bank extends clampdown campaign over bitcoin speculation

THE People’s Bank of China said today it has extended a campaign to warn bitcoin exchanges against misbehavior, as the price of the virtual currency jumped during the week-long Lunar New Year holiday despite earlier crackdowns on market speculation.

The central bank has met with executives from nine bitcoin exchanges in Beijing Wednesday afternoon, and required these trading platforms to operate in compliance with laws. Platforms on the list include Huobi, OKCoin and HaoBTC.

“Trading platforms should not participate in unauthorized financing business, money laundering, or violate policies in foreign exchange, tax and business,” the central bank said in a statement on its official website. Platforms that breach the requirement will be probed and banned from business, it said.

The newest move followed the previous round of central bank clampdown on bitcoion exchanges in January, as the soaring bitcoin price stoked jitters that it may have been used as a channel to channel capital offshore. That coincides with the official data showing on Tuesday that China’s foreign exchange reserves fell to their lowest in nearly six years.

The price of the virtual currency little changed after the statement was released. It traded slightly higher at 7,514.7 yuan (US$1,070) as of 2:45 p.m. today, according to the CoinDesk’s bitcoin prices index. The price rebounded from a 5,555 yuan low in January after the central bank announced probes into “trading misbehavior” of bitcoin exchanges.

Market insiders from HaoBTC told Shanghai Daily that the price rebound during the weeklong Spring Festival holiday, which ended on February 2, was mainly powered by China’s mass speculators who flocked to the bitcoin market in a bid to gain from the currency’s fast appreciation.

Some investors are betting on a surging bitcoin amid depreciating yuan. But analysts warned that blind investment could be risky.

“Investors should always remember that bitcoin lost more than 75 percent of its value in 2013. We do not recommend it as a long-term investment tool, particularly because of compliance concerns,” said Zhang Yufang, an investment adviser with Shanghai Shangding Investment Consultancy.

Regulators are expected to step up inspection over bitcoin exchanges as officials from the central bank visited bitcoin exchange BTCC on February 3 and February 4, Wall Street Journal reported earlier.


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