China Imposes Ban on Bitcoin Deposits
The volatile progress of virtual currency the Bitcoin has been marked by a further setback after BTC China, the world’s largest Bitcoin exchange by trading volume, said that it would no longer be able to accept deposits in renminbi (RMB).
The digital crypto-currency swiftly lost almost 50% of its value as the exchange announced that due to action by a third-party payment provider, YeePay, it would block new deposits in the Chinese currency, although it would still be able to process withdrawals.
BTC’s chief executive (CEO), Bobby Lee, said that while YeePay had given notice that it would no longer provide services, government regulation was to blame for the decision. “As of right now, we have received notice from our third-party payment company that they will disallow customers from making deposits into our exchange,” he added.
Two weeks ago the People’s Bank of China (PBOC) warned that Bitcoin was not legally protected and lacked ‘real meaning’, while barring financial institutions (FIs) from Bitcoin transactions.
On 17 December the PBOC extended the ban to payment companies such as YeePay, and gave them until Chinese New Year, which commences 31 January, to comply by terminating their payment relationship. Although the central bank added that individuals were still free to trade it at their own risk, the ban on third-party payment service providers from doing Bitcoin business effectively makes new purchases of the virtual currency impossible.
This month’s developments mean that Bitcoins are currently about 15 % cheaper in China than elsewhere in the world as of earlier today. Just a month ago, Bitcoins were 30% more expensive in China in response to strong local demand. Bitcoin’s surge in value this autumn is believed to stem from Chinese users adopting the virtual currency and as this support has more recently waned, so too has the price.
Without third party payment providers, new purchases of the currency are near impossible. While Bitcoin’s supporters have argued that the currency is impossible to fully ban, since it exists as a decentralised network of transactions, China’s actions effectively render it useless to merchants and customers and place a question mark over the virtual currency’s future.