Update: Article updated with the official notice by the People’s Bank of China.
Reports are coming in that officials from the People’s Bank of China (PBOC) jointly with the Shanghai’s Financial Office met with the head of BTC China. Following “abnormal price fluctuations” and “to guard against risks and maintain financial stability,” the Chinese authorities wanted to understand the operation of the trading exchange and:
“Urged the platform to behave in accordance with relevant laws and regulations. And perform self-examination and carry out some measures if necessary,” according to our translation of a notice by the PBOC.
According to a regulatory notice issued in 2013, Bitcoin is a specific virtual good, which lacks currency characteristics like legal compensation and mandatory payment. Hence does not have the same legal status as a currency. Therefore, it cannot and should not be used (treated) as real money in market circulation.
It is not clear what measures BTCC was asked to undertake, but China has recently instituted strict capital controls to prevent capital flight due to yuan’s continued decline. There were speculations they may take further restrictive measures towards bitcoin, echoing 2013, with rumors circulating as early as November.
Some believed that due to bitcoin’s relatively small size as well as china’s recent move to attract blockchain talent they may take a different approach this time, but that appears not to be the case as the fight between the global markets and Chinese policy makers to determine yuan’s value continues.
After a brief period of stability following a crash of almost 4,000 CNY yesterday ($300), bitcoin accelerated a downwards turn today following the above news.
It is not clear how successful any restrictive measures would be as loopholes keep rising every time authorities try to enforce capital controls, with a whack-a-mole game in action for now some months. Nor is it clear what cost such measures will have on china’s economy and its attempts to update its financial infrastructure through blockchain technology.
Image from Shutterstock. Chart from BitcoinWisdom.