By
Chimamanda U. Martha
March 27th, 2024
Chinese exchanges suspend withdrawals of virtual currency while the country’s central bank increases pressure on bitcoin companies to stem capital outflows.
China’s three biggest bitcoin exchanges, OKCoin, Huobi and BTC China, have announced they blocked users from withdrawing the digital currency following a meeting with the central bank.
The People’s Bank of China met with executives of nine bitcoin companies on Wednesday to warn them about the need to comply with foreign exchange and money laundering rules. The exchanges that violate the requirements will be shut down, the bank stated.
OKCoin and Huobi, two largest Chinese exchanges, have announced on Thursday they will halt bitcoin withdrawals completely, while BTC China, the country’s third major platform, will stop them to a 72-hour review period. Meantime, users will still be able to sell the digital currency and withdraw proceeds in yuan.
The preliminary inspection by the PBOC unveiled some irregularities in the operations of OKCoin, Huobi and BTC China. The bank discovered that BTC China offered loans, which is beyond the scope of its business. Besides, all the three exchanges provided margin trade, which not only violates the country’s rules but is also a reason of bitcoin’s volatility.
After meeting with the central bank, exchanges said that they would improve their compliance systems to prevent money laundering and other illegal activities. Huobi and OKCoin noted it will take one month to complete the improvements.
PBOC said it had also warned smaller exchanges that they would be closed if any violations were discovered.
China is currently the leading market for bitcoin trading, with OkCoin, Huobi and BTCC accounting for over 90% of the world’s cryptocurrency market, according to Bitcoinity. Huobi and OKCoin jointly process litecoin and bitcoin transactions worth 55 million dollars.
The move comes a few weeks after the POBC launched checks of bitcoin amid concerns that the virtual currency could facilitate outflow of yuan. The growing demand from bitcoin investors led to further depreciation of national currency, which decreased by 6.5% last year, its lowest level since 2010.
Earlier, three bitcoin exchanges started charging 0.2% trading fee for each transaction in an attempt to curb market manipulation and high volatility. Besides, they stopped providing margin lending service and increased scrutiny of customer identities.
Following the announcement on Thursday, the price of bitcoin fell by more than 8% and the ban is likely to continue affecting its value, as traders will have to sell their digital assets to obtain their money back.
During the first week of 2017, bitcoin increased by 20%, but fell by 35% after the authorities launched crackdown on exchanges.
