China to Shut Bitcoin Exchanges (Wall Street Journal)

China to Shut Bitcoin Exchanges
Authorities to ban commercial trading of all virtual currencies
Beijing plans to shut down bitcoin exchanges.
Beijing plans to shut down bitcoin exchanges. PHOTO: CHRIS RATCLIFFE/BLOOMBERG NEWS
By Chao Deng
Updated Sept. 10, 2017 11:39 p.m. ET
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BEIJING—Chinese authorities plan to shut down domestic bitcoin exchanges, delivering a final blow to a once-thriving industry of commercial trading for virtual currencies, which took off inside the mainland four years ago.
The country’s central bank has led a draft of instructions that would ban Chinese platforms from providing virtual currency trading services, according to people familiar with the matter. The move comes after months of scrutiny by Beijing, including a ban last week in China on initial coin offerings, a kind of fundraising via virtual currencies.
Regulators in China have been investigating the domestic market for bitcoin and other virtual currencies since the beginning of the year. For a while, officials considered enacting antimoney-laundering rules on exchanges, even circulating a draft of such rules for them to follow.
But the stakes for Beijing grew as prices of virtual currencies like bitcoin soared, adding to the risk of further speculation by domestic investors. Analysts and investors say one reason bitcoin prices rose last year was that Chinese people began using the asset as a way to bet that the value of the yuan would fall. Virtual currencies in theory can allow holders to bypass the traditional banking system to move money outside of China’s capital-controlled borders.
The People’s Bank of China didn’t respond to a request for comment.
Officials from the central bank, cyberspace administration and banking, securities and other regulatory bodies considered various options for months but ultimately came to a consensus to shut down virtual currency exchanges, said the people.
“Too much disorder was naturally a basic reason” for the ban, said one of the people. The price of one bitcoin traded at around $4,279 Monday morning in Beijing, down 16% from its record on Sept. 1.
Trading volumes have already plummeted in China, with authorities stepping up efforts to rein in exchanges. Analysts say more activity is moving underground, where individuals can send virtual currencies to each other using private addresses, which serve like safe-deposit boxes.
The people said that regulators will likely to have to tolerate noncommercial trading of virtual currencies. “The government also doesn’t have the power to control” that, said one person.
Two of the China’s largest domestic bitcoin exchanges, Huobi and BTCC, said over the weekend that regulators haven’t asked them to shut down, even as speculation grows. “We’re still awaiting formal notification from regulators,” said BTCC Chief Executive Bobby Lee. “It’s obviously a sensitive time period.”
A Huobi spokeswoman declined to comment beyond the firm’s press release. Another domestic exchange, OKCoin, didn’t respond to request for comment.
Appeared in the September 11, 2017, print edition as 'Chinese Authorities Set to Shut Bitcoin Exchanges.'

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