Bitcoin prices tanked on Wednesday after Chinese authorities said they would begin investigating local bitcoin businesses to ensure compliance with Chinese laws.
In a statement released at 4:53 p.m. local time, the People’s Bank of China said its Shanghai branch would scrutinize bitcoin-related business to determine whether they have obtained the necessary licenses to provide credit or operate an exchange and implemented stringent anti-money-laundering systems.
Charles Hayter, founder and chief executive officer at CryptoCompare, which provides cryptocurrency data and analytics, said the Chinese government is stepping up its anti-bitcoin rhetoric.
Instead of ‘we’re watching’ you, it’s now ‘we’re investigating you’,” Hayter said in emailed comments.
Digital currency experts attribute at least part of a more than 100% run-up in bitcoin prices last year to Chinese investors, who have reportedly been using bitcoin to circumvent China’s strict controls on the movement of capital.
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The heaviest selling occurred on Chinese exchanges, where the bitcoin-yuan rate was trading at a discount equal to about $10, Hayter said.
Despite Wednesday’s slide in prices, an increasingly assertive China may help to provide an air of legitimacy to