China’s central bank is holding a closed-door meeting with several domestic bitcoin exchanges on Wednesday, people familiar with the matter said, heightening concerns that regulators will tighten their oversight of trading in digital currencies.
Officials from the People’s Bank of China are meeting Wednesday afternoon with representatives from a number of the nation’s trading venues, the people said, asking not to be named because the meeting is private. Money laundering is among the topics on the agenda, said one person without elaborating.
The cryptocurrency has reacted sharply to reports in the past that China may tighten rules on the digital currency to curb capital outflows. The Wednesday pow-wow follows a regulatory inspection of exchanges including OkCoin, Huobi and BTCC in January. Bitcoin had risen by 120 percent over the past year as investors made purchases to hedge against yuan depreciation. The central bank didn’t respond to a faxed request for comment.
The price of bitcoin plummeted after Bloomberg News reported on the discussions. The digital currency had strengthened as much as 1.7 percent earlier but then reversed course and was down about 2 percent by 4:30 p.m. China time, according to data compiled by Bloomberg.
“There are a lot of people shorting bitcoin now, one because of the regulatory environment, another because the price is relatively high,” said Tian Jia, a Beijing-based trader of bitcoin. “The fact that PBOC continues to look into this issue might make people think that the whole thing isn’t over, and based on past trends, whenever the central bank holds meetings with exchanges the price will drop.”
China has taken a central role in the bitcoin market in recent years as its citizens have become leading traders and miners of the cryptocurrency. Their interest has been fueled by the hunt for alternative assets, zero exchange fees and the low cost of electricity to run the computers needed to mine the currency. But any increased scrutiny from government authorities may dampen purchases of bitcoin in China.
China’s three largest bitcoin trading venues have begun charging transaction fees of 0.2 percent to suppress speculation and prevent big price swings, the companies said in separate statements issued in January. OkCoin and Huobi.com also said they won’t offer clients new quotas for leveraged services on bitcoin investment. OkCoin Chief Executive Officer Star Xu suggested the PBOC set up a third-party custodian platform to prevent exchanges from absconding with users’ money, the company said in an e-mailed statement.
Bitcoin trading volume plummeted in China following the imposition of exchange fees, while its price had risen 11 percent this month before Wednesday’s move.
— With assistance by Heng Xie, and Lulu Chen
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