Reports coming out of Chinese media today have put the spotlight on irregularities in the operations of major bitcoin exchanges, according to reported claims from the People’s Bank of China (PBOC).
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These operational irregularities in financial business practices led to abnormal fluctuations in the market, as discovered by the authority’s business management department during the recent on-site checks conducted by the PBOC.
According to a report on JF Daily, a preliminary inspection by the Shanghai branch of the PBOC supposedly showed that BTCChina had operated beyond the scope of its business by offering loans, which is a violation of rules. Further, the report points to a lack of implementing a 3rd party depository of investors’ funds. As a result, PBoC Shanghai has urged both institutional and individual investors and traders to pay attention to the risks inherent with BTC China.
A separate report from Hexun revealed preliminary inspections of OKCoin and Huobi, the two other bitcoin exchanges that have been under the PBOC’s scanner besides BTCChina. Margin trading, a loan feature that all three platforms had provided was deemed to be in violation of rules and is seen by the PBOC as the cause for bitcoin’s recent volatility. The inspection also – notably – has the central bank claim that the exchanges had not established sufficient anti-money laundering measures.
All three exchanges have stopped margin trading and futures trading, following the PBOC’s visits.
BTC China is the first to publicly issue a statement in response to today’s developments.
The response, posted on its Weibo account, reads (roughly translated) as follows:
Pertaining to the PBoC Shanghai headquarters announcement: BTCChina will continue to actively cooperate with the PBoC inspection related departments, and carry out rectification work. BTCChina is currently functioning normally.
The three bitcoin exchanges have publicly sought Chinese authorities’ regulation in the industry. With some whispers of a PBOC-controlled “third-party custody” system, the PBOC’s involvement is keeping traders on their toes, with the community in the dark about sweeping measures by the PBOC, if any.
With the latest update of the PBOC’s investigations into bitcoin trading in China, price fell today to reach a low of $851, down over 5% on the day’s trading after scaling a high of $915.99 on the Bitstamp Price Index (BPI).
At the time of publishing, a recovery has since seen bitcoin price scale back toward $874.
Hat tip to CnLedger.
Featured image from Shutterstock. Chart from BitcoinWisdom.