Big China bitcoin exchange says no
government pressure on outflows
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[January 09, 2017]
By John Ruwitch
SHANGHAI (Reuters) - The head of a major
bitcoin exchange in China says few people there use the cryptocurrency
to get around rules on how much money they can take out of the country,
and despite a publicized meeting with the central bank last week the
exchange, BTCC, hasn't been told explicitly to check capital outflows.
Bitcoin's price took a steep dive on Friday after China's central bank
cautioned investors to take a rational and careful approach to investing
in the digital currency. The price had surged to record highs.
The central bank's comments come as Beijing escalates a campaign to
check capital outflows and slow the depreciation of the yuan currency
<CNY=CFXS>, which lost nearly 7 percent of its value against the U.S.
dollar last year.
With bitcoin's soaring price and the relative anonymity it affords, some
believe the digital currency was becoming an attractive option for
tech-savvy Chinese to hedge against the yuan and circumvent rules that
limit individuals to $50,000 of foreign exchange each year.
The Shanghai office of the People's Bank of China (PBOC) said on Friday
it had met with BTCC to understand the platform's operations, highlight
the risks, remind the exchange to abide by the law, and "urge the
platform to carry out self-examination and corresponding clean-up and
rectification" according to law.
Asked if BTCC had received direct pressure on outflows, CEO Bobby Lee,
who founded BTCC in 2011, said: "No. Not as of yet... Nothing verbal or
written to us."
In Beijing, the PBOC told two of China's other big bitcoin exchanges,
Huobi and OKCoin, not to mention the depreciating yuan when advertising
their platforms, the influential news outlet Caixin said, citing people
familiar with the meeting.
Star Xu, CEO and founder of OKCoin, confirmed there had been a meeting
of the PBOC and leading bitcoin exchanges on Friday to discuss the
operation of trading platforms.
"The industry can benefit from balanced, risk-based regulation and/or
oversight, and we look forward to further constructive discussions with
the regulators and industry participants," Xu told Reuters in an emailed
While it's possible to buy bitcoin with yuan and then sell it abroad for
a foreign currency, BTCC's Lee said "to be honest, not many" people were
doing it because of the cost.
The renminbi price of bitcoin carries a premium to the price in other
currencies, he noted. In addition, buy or sell orders in the 100,000
yuan ($14,423) to 1 million yuan ($144,233) range, and up, would
influence the bitcoin spot price and affect the transaction.
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A Bitcoin (virtual currency) paper wallet with QR codes and a coin
are seen in an illustration picture taken at La Maison du Bitcoin in
Paris, France, May 27, 2015. REUTERS/Benoit Tessier/File Photo
"For that range, you're not going to be able to do it at a good rate.
You're going to lose 10 percent of your money," Lee said. "Maybe the
individual household might buy 20,000 more dollars worth of bitcoin than
their $50,000 (forex) quota, but that's a drop in the bucket."
Still, Lee said various indicators, like active trading accounts,
new users, actual deposits and withdrawals, were "very active" in
China, and some key BTCC metrics were at "all-time highs", though he
declined to be more specific.
NOT LEGAL TENDER
Bitcoin is not regulated in China, but the PBOC has declared it is
not legal tender, and is instead a "virtual good", Lee said. That
puts it in the same category as other goods.
"If I pack a suitcase and take a plane to the United States, do the
clothes, does the computer in my suitcase, does the watch I wear
count towards capital flight?" he said. "Where do you draw the
He said no new or planned rules regarding bitcoin were discussed in
the latest meeting with the PBOC, and he estimates it will be two to
three years before China regulates bitcoin.
In a statement on its website, BTCC, which calls itself the world's
longest running bitcoin exchange, said it regularly meets with the
PBOC and "work(s) closely with them to ensure that we are operating
in accordance with the laws and regulations of China."
Exchanges in China say they account for more than 90 percent of
global bitcoin trading, which would help explain why a shift in
Chinese demand would sharply affect the price.
But many bitcoin experts say Chinese exchanges overstate their
volumes in the digital currency, and attribute sharp moves to
speculation by, for example, U.S.-based hedge funds.
(Reporting by John Ruwitch; Editing by Ian Geoghegan)
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