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Beijing Announces Trading Halt for Cryptocurrency Exchanges

bitcoin
Authorities have ordered Beijing-based cryptocurrency exchanges to stop trading and immediately notify users of their closure.

bitcoin

Chinese authorities have ordered Beijing-based cryptocurrency exchanges to stop trading and immediately notify users of their closure, which is signaling a crackdown by authorities on the industry to contain financial risks.  Exchanges were also told to stop allowing new user registrations as of Friday, according to a government notice.  The notice was signed by the Beijing city group in charge of overseeing internet finance risks and circulated online.  By September 20, these platforms will also need to inform the government how they will allow users to make risk free withdrawals and handle funds to make sure investor interests are protected.

All trading exchanges must publish a notice to make clear when they will stop all cryptocurrency trading and announce a stop to new user registration.  This should have been done by September 15.  Why is this happening now?  China is cracking down on the cryptocurrency business to try to limit risks as consumers pile into a highly speculative market that has grown incredibly over the last year.  BTCChina, a major Chinese bitcoin exchange, said on Thursday it would stop all trading from September 30, citing tightening regulation.  Even smaller Chinese bitcoin exchanges announced similar closures on Friday.

Li Lihui, a senior official at the National Internet Finance Association of China and a former president of the Bank of China, told a conference in Shanghai that global regulators should work together to supervise cryptocurrencies.  Lihui made the following statement:

“Digital tokens like bitcoin, ethereum that are stateless, do not have sovereign endorsement, a qualified issuing body or a country’s trust, are not legal currencies and should not be spoken of as digital currencies. They can become a tool for illegal fund flows and investment deals.”

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He also went onto say that there should be a distinction between digital currencies, which were being studied and developed by authorities such as the Chinese central bank, and digital tokens such as Bitcoin.  Digital currencies developed by authorities could be used for good, with the right regulation, he said.  The state-backed internet finance body was set up by the central bank, and its members which include banks, brokerages, funds and consumer finance companies.  On Wednesday, it urged members to abide by Chinese laws and not deal in cryptocurrencies.

Since January, Chinese bitcoin exchanges have rolled out a series of changes to comply with increased scrutiny by Beijing.  But they were thrown into chaos on September 4, when China issued a directive banning initial coin offerings (ICOs).  According to Lihui. this crackdown “is all about protecting market stability and protecting the interest of investors, so halting these kinds of initial coin offerings is a very necessary action,”.

Bitcoin has some critics in the United States, including JP Morgan Chase Chief Executive Jamie Dimon, who calls the currency a “fraud” and indicates that “Bitcoin will eventually blow up.   It’s a fraud. It’s worse than tulip bulbs and won’t end well”.  Mark Cuban suggests that Bitcoin actually exists in a bubble, and that bubble will burst eventually.  That can be seen, for the most part, with the currency gaining traction so quickly.  However, we can see that this might not be the case, based on what is happening in China right now.  So perhaps Cuban is right, and that we are on the breaking point of that bubble.

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