Two of China's largest exchanges for buying and selling Bitcoin, OKCoin and Huobi, announced on Friday that they will stop trading Bitcoin for Chinese yuan effective immediately. The reason, the exchanges stated, is to comply with Chinese government directives issued on Thursday.
While the suddenness of the Bitcoin trading ban was surprising, it reflects a larger trend in China toward regulating crypto markets. Earlier this month, China's central bank outlawed Initial Coin Offerings—a method of raising capital for blockchain-based companies—in a telltale sign that the country was moving to tighten regulations on cryptocurrencies. China is a major hub for Bitcoin mining, a resource-intensive process that confirms transactions and updates Bitcoin's public ledger, the blockchain.
Fears that this would lead to an outright ban on trading cryptocurrencies in China were confirmed Thursday when the Chinese news outlet Yicai reported that "the order has come from above" to shutter all Chinese Bitcoin exchanges by the end of September.
The cessation of yuan-to-Bitcoin trading means that Chinese citizens will no longer be allowed to buy Bitcoin using their national currency. However, Huobi and OKCoin will continue to allow trading from one cryptocurrency to another.
"OKCoin is doing its best to respond positively to the national regulation and to propose and explore regulatory recommendations and programs aimed at protecting the interests of its users," OKCoin said in a statement. "The decision is not the end, but a new start."
Motherboard reached out to OKCoin and Huobi for comment, and we will update this post if we hear back.
The announcement OKCoin was followed by a document leaked on the Chinese social media site Weibo that purports to show the contents of a verbal directive issued to Chinese Bitcoin exchanges from government officials. Motherboard was not able to independently verify this document's authenticity.
According to a translation provided by Bitcoin trade blog Coindesk, the unverified document lists six steps that the exchanges must take during closure. These steps included announcing that the exchanges will halt yuan trading by midnight on Friday, and sending all user trading and holding data to the government on DVDs. Motherboard has reached out to Huobi and OKCoin about the nature of this data, but has not received a reply at the time of writing.
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At the time of writing, most major Chinese Bitcoin exchanges had complied with the government's directive. In addition to Huobi and OKCoin, BTC China and ViaBTC also announced that they would be halting trading in yuan.
The reasoning behind China's sudden crackdown on cryptocurrency trading is not entirely clear. In February, government officials reportedly met with Bitcoin exchange leaders, ostensibly to discuss how to limit the use of these services for money laundering. These meetings were followed by a three-month ban on cashing out Bitcoin from exchanges, which was lifted in June.
Optimists in the Bitcoin community are hoping that the Chinese ban on Bitcoin trading will be similarly temporary, but for now, it looks like Chinese citizens will be unable to get in on the Bitcoin speculation bonanza.