SHANGHAI: The virtual currency Bitcoin crashed in China yesterday, falling nearly 50 percent after the country’s biggest trading platform BTC China banned deposits in yuan following new restrictions reportedly imposed by the central bank.
Chinese speculators have driven Bitcoin prices into the financial stratosphere this year, peaking at 7,588.88 yuan (now $1,250) on November 30.
By late yesterday they stood at 2,245 yuan, more than 70 percent lower, and down 42.7 percent from their 24-hour high after skidding as much as 48.7 percent earlier.
Bitcoin, invented in the wake of the global financial crisis by a mysterious computer guru using the pseudonym Satoshi Nakamoto, is a form of cryptography-based e-money. It can be stored either virtually or on a user’s hard drive, and offers a largely anonymous payment system.
But Beijing keeps a tight grip on the yuan and enforces capital controls, which the e-currency threatens by its very nature.
Two weeks ago the People’s Bank of China (PBoC), the central bank, ordered financial institutions not to provide Bitcoin-related services and products and cautioned against its potential use in money-laundering.
Reports earlier this week said it had banned domestic third-party payment companies from providing clearing services for virtual currency trading platforms, and yesterday BTC China said it was stopping taking yuan deposits — but withdrawals were still allowed.
While the PBoC made no announcements Wednesday on any new curbs, analysts said the reported central bank instruction, if confirmed, could cripple Bitcoin trading in China.
“If the channel for depositing yuan in the platforms was completely cut off, all domestic exchanges would be invalid,” James Gong, a digital currency expert and member of the US-based Bitcoin Foundation, said. “Bitcoin trading might be forced underground or shift to overseas markets,” he said, adding the move would be a ban on Bitcoin trading “in disguised form”.
BTC China asserted that its operations would continue. In a notice posted on its website it said: “Due to new government regulations, BTC China will temporarily suspend CNY (yuan) deposits.”
AFP
