China Threatening Bitcoin Exchanges With Closures
by Jett Withnell
The central bank in China has issued a warning that Bitcoin exchanges will risk being closed if they are found to violate the country's currency regulations. The warning resulted as China's bank regulator attempted to curb capital overflowing from China following a continued weakening of the yuan.
According to the People's Bank of China website, exchanges have been told not to take part in businesses like margin lending or money laundering. If violations are found circumstances will get serious. An inspection team will Work to close down the offending bitcoin exchange.
The founder of one such exchange known as Bitpie says that most people are just watching to see how serious the regulators are going to be. This individual even told the Wall Street Journal that they haven't exactly said that they would close a particular business. They are getting stricter, however.
The country' largest Bitcoin exchanges met last month with Chinese regulators. They were reminded to follow all new regulations strictly. The virtual currency has been rising in popularity in China. This is due in large part to the fact that the yuan has depreciated.
Bitcoins have doubled in value since 2016. That is more than 100 percent over the year. The Chinese yuan went through the worst period ever, recently, clearly outshined by digital money.
China makes up most all of Bitcoin trading and does have strict capital controls. This makes it difficult for the Chinese to convert the yuan into foreign currency. This also limits the number of cash investors that can move abroad. The following subsequently forces Chinese people to employ the cryptocurrency to get around investment capital regulations and reduce risk coming from the slipping yuan.
Bitcoin's attempt to become the best-performing currency has caught the attention of Chinese regulators. The PBOC recently showed that the FX reserves in China went below three trillion dollars for the first time in six years. They went from 12.3 trillion to just 2.9 trillion dollars.
Beijing has invested over a quarter of its reserves to prop up the yuan in recent years. Still, reserves have fallen by $320 billion in 2016 alone after a record drop of $513 billion the year before that. Bitcoin exchanges need to remain vigilant and follow the regulations.