Under new regulatory guidance, all cryptocurrency exchanges in China are telling customers today how and when they will stop trading. No new customers can be registered after today, and the exchanges have five days to send a wind-down plan to authorities. Exchanges cannot simply shut down today, but must minimize financial risk for their customers. Reuters story at Forbes: China Is Shutting Down All of Beijing’s Bitcoin and Cryptocurrency Exchanges.
The move is not a complete surprise after China banned cryptocurrency-based securities, released an official finding that cryptocurrency cannot be treated as currency, and urged licensed banks not to trade in cryptocurrency. Currency controls, though not fully effective, are seen by central government economic planners an important part of national economic controls, and cryptocurrency inherently has the potential to undermine or soften currency controls. One major bitcoin exchange had already announced it was closing at the end of the month, citing tighter regulation as its reason for closing.
Bitcoin has lost some of its value in recent days as officials and analysts have expressed skepticism about the format. Bitcoin fell 5 percent after China’s announcement on cryptocurrency exchanges, though bitcoin is highly volatile by nature. A 5 percent move would represent a panic if it occurred in a national currency but is expected in bitcoin, which is not considered a store of value.