The People’s Bank of China (PBOC) yesterday held a closed-door meeting with several domestic bitcoin exchanges, people familiar with the matter said, heightening concerns that regulators will tighten their oversight of trading in digital currencies.
Officials from the central bank were meeting with representatives from a number of the nation’s trading venues, the people said, asking not to be named because the meeting was private.
Money laundering is among the topics on the agenda, one person said without elaborating.
The cryptocurrency has reacted sharply to reports that China might tighten rules on the digital currency to curb capital outflows.
The meeting follows a regulatory inspection of exchanges including OkCoin, Huobi (火幣網) and BTCC (比特幣中國) last month.
Bitcoin had risen by 120 percent over the past year as investors made purchases to hedge against yuan depreciation.
The central bank did not immediately 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 4:30pm, 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 the 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,” Tian said.
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, no exchange fees and the low cost of electricity to run the computers needed to mine the currency.
However, increased scrutiny from government authorities might 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 last month.
OkCoin and Huobi.com also said they will not offer clients new quotas for leveraged services on bitcoin investment.
OkCoin chief executive officer Star Xu (徐明星) said that the central bank 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 yesterday.
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