China, home to the world’s biggest community of Bitcoin miners, is cracking down on cryptocurrency activity. From a halt to virtual currency trading on domestic exchanges to banning initial coin offerings, regulators have taken a proactive role in shaping the stratospheric rise of Bitcoin and its peers.
The country’s moves come as President Xi Jinping targets financial risk in the economy following a decade of booms and busts in everything from stocks to real estate. The result: China’s once-dominant role in the world of cryptocurrencies is shrinking.
News came this week that the volume of currency trades between the RMB and bitcoin have plummeted in recent months. While that pairing comprised more than 90 percent of global bitcoin trades in December, trades involving the Chinese currency now only make up a mere 1 percent of all BTC trades.
Experts in China fear losing control over the rapidly emerging cryptocurrency market that took on extra growth and volatility at the end of 2017.
The total ban in China came in at the start of February 2018 when the People’s Bank of China (PBOC) – the central regulatory authority for financial institutions and monetary policy – issued a statement that it would “block access to all domestic and foreign cryptocurrency exchanges and ICO websites.”
That ban led to an instant 10% drop in bitcoin prices. Soon after the ban was announced, the Shanghai-based BTCC bitcoin exchange, formerly one of the world’s highest-volume exchanges, announced that it had been forced to close its Chinese trading operations.
If the latest report from Xinhua is to be believed, then this ban has worked incredibly well. Chinese traders have moved their activities to the semi-autonomous region of Hong Kong, while Japanese exchanges have become more prominent following the ban.
It’s also important to note that 1% of global BTC trading volume is still a significant figure. Over the last 24 hours, traders traded approximately $3.6 billion worth of bitcoin across all crypto exchanges. If the Chinese Yuan accounts for 1% of this trading volume, then that means the Chinese Yuan is responsible for approximately $36 million USD (240 million CNY) of bitcoin trading volume every day – still a significant amount.
There’s been no explicit explanation, but cleansing risk from financial markets has been a government mantra for more than two years. Among the main concerns is the booming shadow banking sector, a potential source of unregulated loans to speculators in whatever the latest craze happens to be.