On June 1, Bitcoin prices passed the $2400 on news that three major Chinese exchanges were going to allow customers to withdraw Bitcoin after all, reversing a decision they had made just three months ago. This comes on the heels of several back-and-forth decisions on the matter, with each decision causing fluctuations in the global value of the currency.
In February, a series of meetings between the People's Bank of China and Chinese Bitcoin exchanges gad led analysts to speculate about the future of the digital currency in the Asian nation. In the aftermath of those closed-door meetings, two Chinese exchanges for the cryptocurrency announced that all Bitcoin withdrawals would be suspended indefinitely. This has had a dramatic and sudden impact on the price of Bitcoin around the world, and has led to a great deal of confusion about China's relationship with Bitcoin and other non-centralized cryptocurrencies.
Huobi and OKCoin Lead the Withdrawal Suspensions
The two Chinese bitcoin exchanges to lead the suspension of withdrawals are Huobi and OKCoin. A statement released by Huobi and tracked by ZeroHedge suggests that the Chinese government is looking to crack down on Bitcoin trades. The People's Bank of China seems to be concerned with violations of rules related to money laundering and foreign exchange management. While the ban on withdrawals was issued suddenly, the period of the past few weeks has seen scrutiny over the Bitcoin exchanges heating up in China. The Chinese government has expressed concern that Bitcoin could facilitate capital flight in the Chinese economy. China perhaps has unique reasons for this concern, as it accounts for about 98% of total global Bitcoin trading in the most recent six months.
The concern specifically seems to be that Chinese investors could buy Bitcoin on Chinese exchanges and then sell them elsewhere, thereby bypassing the official limits on conversion between Chinese renminbi and other foreign currencies. While supporters of the exchanges say that poor liquidity tends to make these types of transfers challenging and expensive, they seem to have nonetheless provoked the suspension.
Platforms to See Changes, Bitcoin Price Affected
Platforms like Huobi and OKCoin have announced plans to change their systems in an effort to "prevent and attack the exploitation of Bitcoin for money laundering, foreign exchange conversion, pyramid schemes and other illegal behavior." At the same time, though, the immediate aftermath of the withdrawal suspensions on the price of Bitcoin was sudden and notable. The announcements by these exchanges seems to have prompted the digital currency to drop below $1000 for the first time in many weeks.The crackdown seems to also come at the same time as the People's Bank of China efforts to stimey downward forces on the value of the renminbi have ramped up. The renminbi saw depreciation of 6.5% for last year, marking the currency's worst year in history. OKCoin, Huobi, and other affected platforms estimate that the required upgrades will be completed within the next month or so, but the longer term future of Bitcoin in China is still unclear.