Bitcoin value drops as China allegedly closes digital exchanges

Bitcoin value drops as China allegedly closes digital exchanges

Bitcoin value drops as China allegedly closes digital exchanges

On September 8, when local news media outlet Caixin reported about the closure of trades and exchanges between virtual currency and fiat in China, the Bitcoin price fell sharply from around $4,600 to $4,100.

The ban will apply only to trading of cryptocurrencies on exchanges, according to people familiar with the matter. Authorities do not plan to stop over-the-counter transactions, according to the people.

One person close to officials of China's central bank and various cybersecurity bodies said that "too much disorder was naturally a basic reason" for the ban.

Until now, about a ¼ of all Bitcoin trades were processed in China, but new legislation, if accepted, may change that situation. While existing users will likely still trade, according to Zhou Shuoji, a founding partner at FBG Capital interviewed by Bloomberg, it will make it more hard for new users to start trading Bitcoin-thereby limiting Bitcoin's potential growth. "Old users will definitely still trade, but the entry threshold for new users is now very high".

While governments around the world regulate and closely watch IPOs, ICOs are not regulated, and they have been used by many companies to raise funds without a guarantee that the token issuer will re-buy tokens and not run away with most of the funds.

Trading volume would definitely shrink.

The clampdown is seen as part of China's efforts to regain greater control over its own currency, the yuan, after the surge in bitcoin's price past year was attributed to eager Chinese buyers looking to sell yuan, fearing its collapse.

"There has been a general tightening of the screws on regulating financial and monetary conditions", said Mr Mark McFarland, chief economist at Union Bancaire Privee. The three largest exchanges, OKCoin, BTC China and Huobi, account for 60% of Bitcoin trading in the country.

In a move that could severely affect the whole cryptocurrency industry, Chinese authorities are now planning to shut down domestic bitcoin exchanges across mainland China.

China really doesn't want external cryptocurrencies to function in its country.

China's influence on global markets is not restricted to just traditional currencies, with the country's biggest exchanges accounting for a fifth of all transactions over the course of the past month. "So you will get quite substantial pullbacks at some point".

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