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February 10, 2017

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PBOC warns to shut Bitcoin bourse

THE People’s Bank of China warned yesterday that it will close Bitcoin exchanges which breach rules on money laundering and foreign exchange.

The PBOC met with executives from nine Bitcoin exchanges, including Huobi, OkCoin, BTCC and HaoBTC, in Beijing on Wednesday and ordered them to operate according to the law.

“Trading platforms should not participate in unauthorized financing business, money laundering, or violate regulations on foreign exchange, tax and business,” the PBOC said in a statement on its official website. Platforms that breach the rules will be investigated and shut down, it warned.

In response, OkCoin and Huobi said they’ve halted Bitcoin trading and it will not resume until completing an system upgrade to prevent money laundering.

Huobi also said it will “block accounts that are suspected of illegal practices.”

HaoBTC said a trading curb will start from 2pm today limiting investors to trade no more than 5 Bitcoin within 48 hours. It will also raise the trading fee to 0.4 percent per transaction from 0.2 percent.

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

The price of the virtual currency was little changed around 7,500 yuan (US$1,093) after the PBOC statement was released, according to the CoinDesk's Bitcoin price index. But the gauge lost roughly 10 percent to 6,775  yuan from then by 12:50am today after exchanges halt tradings. 

The price rebounded from a low of 5,555 yuan in January after the central bank launched checks into BTCC, Huobi and OkCoin as the soaring Bitcoin prices stoked jitters that the exchanges may have been used as a channel to move capital offshore.

Market insiders from HaoBTC said the Bitcoin price rebound during the weeklong Chinese New Year holiday was mainly powered by speculators who flocked to the Bitcoin market in a bid to gain from the virtual currency’s fast rise.


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