Major exchanges have frozen withdrawals and will impose new fees and controls.
Markets for bitcoin and other digital cryptocurrencies dipped by more than 7% on February 9th, following news that the People’s Bank of China, the country’s central bank, was tightening regulatory pressure. The PBoC met Wednesday with the country’s major Bitcoin exchanges to push for full compliance with anti-money laundering rules. As detailed by CoinDesk, the price of Bitcoin dropped from around $1,063 dollars to around $988, before recovering slightly to around $1,000 by Sunday.
Following the meetings, two of China’s largest bitcoin exchanges temporarily halted the withdrawal of bitcoin and another currency, litecoin. The move did not affect the withdrawal of yuan, and the companies said the halt would last one month while they improved protections against money laundering and other illegal activity.
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A half-dozen Chinese bitcoin exchanges have also said they will institute new trading fees. That’s a continuation of a PBoC push in January to end the practice of no-fee trading, which is seen as artificially inflating trading volumes. The fee increases already implemented have driven trading volumes on Chinese exchanges down sharply.
Chinese exchanges have long made up a large portion of the overall market for cryptocurrency, and their influence has been a consistent source of anxiety in the market. Previous dips in the price of bitcoin have been driven by Chinese regulation, including a 2013 decision banning banks from handling bitcoin as a currency. Significant price surges, meanwhile, have been caused by domestic Chinese trends, such as a 2015 craze for a bitcoin-fueled Russian pyramid scheme.
While increased PBoC oversight may briefly dampen the cryptocurrency market, then, it could also signal greater long-term stability.
According to Bloomberg, the recent regulatory pressure on Bitcoin from the PBoC is likely driven by the Chinese government’s desire to control capital outflows from the country.