Bitcoin markets remain volatile today following the decision by a number of leading exchanges in China to suspend all withdrawals of the currency pending improved protections against money laundering and other illegal activity.
The move to suspend bitcoin withdrawals was made on Thursday by BTC China, OKCoin and Huobi.com, the three largest exchanges in the country. That followed a meeting Wednesday with the People’s Bank of China where the central bank requested that bitcoin exchanges do more to prevent illegal transactions. Notably, the ban does not extend to yuan, meaning that users of the three exchanges can still sell their bitcoin holdings and receive payment in the local currency.
China’s central bank launched an investigation into bitcoin transactions in January with spot checks on exchanges to make sure the companies had correct licenses and to assure that they have implemented anti-money laundering systems, as well as whether they are involved in market manipulation. The initial investigation led to the three largest Chinese exchanges introducing a fee of 0.2 percent on all buy and sell orders later that month, a move that caused bitcoin trading volumes to drop by 90 percent in one day. The introduction of the fees made it impossible for automated trading platforms to make a profit on strategies such as cross-exchange arbitrage.
According to reports, BTC China subjected all bitcoin withdrawals to a 72-hour review, while Huobi and OKCoin has suspended them completely. All three said the measures were in response to central bank requirements to “prevent and attack the exploitation of bitcoin for money laundering, foreign exchange conversion, pyramid schemes and other illegal behavior.” The Financial Time’s claims that OKCoin and Huobi have estimated that their upgrades could take as long as one month to complete.
The price of bitcoin dropped as low as $954 in trading Thursday until recovering slightly over the weekend to trade to a little over $1,000 as demand shifted away from China and into other markets — in particular Japan, which has now surpassed China as the world’s largest bitcoin market.