China is said to ban bitcoin exchanges

BEIJINGChina plans to ban trading of bitcoin and other virtual currencies on domestic exchanges, dealing another blow to the US$150 billion (RM630 billion) cryptocurrency market after the country outlawed initial coin offerings last week.

The ban will only apply to trading of cryptocurrencies on exchanges, according to people familiar with the matter, who asked not to be named because the information is private.

Authorities don’t have plans to stop over-the-counter transactions, the people said.

Bitcoin slumped last Friday after Caixin magazine reported China’s plans, capping the virtual currency’s biggest weekly retreat in nearly two months.

The country accounts for about 23% of bitcoin trades and is also home to many of the world’s biggest bitcoin miners, who use vast amounts of computing power to confirm transactions in the digital currency.

“Trading volume would definitely shrink,” said Zhou Shuoji, Beijing-based founding partner at FBG Capital, which invests in cryptocurrencies.

“Old users will definitely still trade, but the entry threshold for new users is now very high. This will definitely slow the development of cryptocurrencies in China.”

While Beijing’s motivation for the exchange ban is unclear, it comes amid a broad clampdown on financial risk in the run-up to a key Communist Party leadership reshuffle next month. — Bloomberg