The rollercoaster ride that is the Bitcoin market took a deep dive yesterday following yet another bombshell out of China – this time round, the People’s Bank of China has been rumored to consider banned third-party payment companies from doing business with Bitcoin exchanges.
Bitcoin prices fell by around 30% on hearing the news, which was first reported by Coindesk.com and later confirmed in a tweet by Bill Bishop, the editor of the Sinocism newsletter and a New York Times contributor. There is still some speculation regarding the authenticity of these reports, but if they do turn out to be true, things could be very bleak for Chinese investors in BTC. The reports certainly have the community worried – at the time of writing, Bitcoin’s value had sunk to $707.9 as a weighted average across multiple exchanges, according to Bitcoinaverage.com.
The PBoC’s decision apparently came during a meeting between its officials and those from about a dozen third-party payment companies, which include the popular Alipay service. During the meeting, the companies were reportedly told they could no longer offer services to buy or sell BTC on exchanges, says Coindesk. The ban also covers other cryptocurrencies, including Litecoin.
The Chinese language news site Yicai further elaborated on the report, stating that users can still withdraw money from BTC exchanges via third-party payment processors until Jan 31, but they can no longer deposit funds. It’s too early to tell what kind of effect this will have on the Chinese Bitcoin community, but the biggest fear is it could lead to a run on exchanges that would severely disrupt what is already an extremely volatile market. Certainly, it’s not going to make things any easier – exchanges are by far and away the most common platform for trading in Bitcoins, and without them the only options are buying direct from miners, peer-to-peer trading and other inconvenient methods.
For now, Yicai notes that Chinese buyers still have one avenue for buying and selling on Bitcoin exchanges – their normal Chinese bank accounts – but warns that these could be banned too, as most of them are state-controlled.
We should note that not everyone is convinced of the accuracy of these reports. Coindesk doesn’t name any sources in its report, whilst SiliconANGLE’s founding editor and Bitcoin expert Mark Hopkins cautioned his followers on Facebook that “these rumors out of China almost always turn out to be misinterpreted.”
We’ll post an update if and when the news is clarified.
On the same day as the PBoC’s ruling, Coindesk reports that China’s largest exchange, BTC China, has re-implemented 0.3 percent fees for each transaction – a move that it said is designed to prevent impulsive trading and stabilize the market. Previously, BTC China was offering a zero percent commission promotion.