Chinese Authorities Set to Tighten the Noose Around Bitcoin

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Chinese Authorities Set to Tighten the Noose Around Bitcoin

Bitcoin exchanges are set to suffer another survival-threatening blow from Chinese regulatory authorities.

Sources familiar with the on-goings have suggested that the People’s Bank of China might order all banks in the country to terminate all Bitcoin trading accounts, according to Financial Times. The move will block the last main channel by means of which traders in China can purchase the digital currency.

“This would be a bad thing for the exchanges. But it is certainly within the realm of what the government is allowed to do. We are taking things one day at a time,” said Bobby Lee, chief of BTC China, one of the leading Bitcoin exchanges in the country.

The price of the digital currency has dropped to $475 since Thursday, when a Caixin, a Chinese financial magazine first reported the ban, suggesting it would be implemented by April 15.

Bitcoin has declined by almost 60% from its highest value in November 2013, just before Chinese authorities took the first step towards stemming the digital currency’s growth that was drastic at the time.

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Already, Chinese authorities have banned financial institutions from supporting Bitcoin transactions. Third part payment firms have also been barred from facilitating Bitcoin exchanges.

However, Bitcoin exchanges found a way to sidestep the regulations by taking payments directly from customers’ accounts. Thus, by taking up the roles of third party payment providers, the exchanges have been able to offer the same services authorities have been trying to stop.

But the new regulations from the China’s central bank seek to outlaw the holding of corporate accounts by Bitcoin exchanges.

As The Australian reports, monetary authorities have been wary of the risk associated with Bitcoins after the fall of Mt.Gox, the once largest Bitcoin exchange in the world. Mt.Gox reported last month the theft of Bitcoins belonging to customers and the exchange itself.

Bitcoin is deemed as a currency that can cause financial instability.

To contact the reporter of this story: Deepak Tiwari at deepak@forexminute.com