Heightening concerns that regulators will tighten their oversight of trading in digital currencies, China’s central bank is holding a closed-door meeting with several domestic bitcoin exchanges on Wednesday, sources reportedly familiar with the matter said.
The sources have confirmed to several media that representatives from a number of the nation’s trading venues are meeting up with officials from the People’s Bank of China this week to discuss issues related to the electronic currency. One of the sources also confirmed to the media that one of the topics on the agenda for the meeting would be money laundering.
There were reports and fears in the past that China may tighten rules on the digital currency to curb capital outflows and the cryptocurrency has reacted sharply to such reports then. In January this year, there was a regulatory inspection of exchanges including OkCoin, Huobi and BTCC and the latest meeting between the crypto currency exchange representatives and the Chinese authorities follows that inspection.
As investors made purchases to hedge against yuan depreciation, bitcoin had risen by 120 percent over the past year. There were no coments available from the Chinese central bank.
After the reports about the discussions became public there has beena crash in the price of bitcoin. According to data compiled by Bloomberg, the digital currency reversed course and was down about 2 percent by 4:30 p.m. China time after it had strengthened as much as 1.7 percent earlier.
“There are a lot of people shorting bitcoin now, one because of the regulatory environment, another because the price is relatively high,” said Tian Jia, a Beijing-based trader of bitcoin. “The fact that PBOC continues to look into this issue might make people think that the whole thing isn’t over, and based on past trends, whenever the central bank holds meetings with exchanges the price will drop.”
As thousands of Chinese citizens have become leading traders and miners of the crypto currency, the country has taken a central role in the bitcoin market in recent years. The low cost of electricity to run the computers needed to mine the currency, the hunt for alternative assets and the zero exchange fees have all fueled the interest of the Chinese people in the digital currency. However the purchases of bitcoin in China could be dampened by any increased scrutiny from government authorities.
Three companies said in separate statements issued in January that in order to suppress speculation and prevent big price swings, China’s three largest bitcoin trading venues have begun charging transaction fees of 0.2 percent. They won’t offer clients new quotas for leveraged services on bitcoin investment, said OkCoin and Huobi.com. OkCoin said in a statement that to prevent exchanges from absconding with users’ money, the PBOC setting up of a third-party custodian platform by the PBOC has been suggested by its Chief Executive Officer Star Xu. While bitcoin’s price had risen 11 percent this month before Wednesday’s move, its trading volume plummeted in China following the imposition of exchange fees.
(Adapted from Bloomberg)
Categories: Economy & Finance