Bitcoin price tumbles as China orders exchanges to be shut down

11 Sep 2017

A bitcoin beside Chinese yuan currency. Image: William Potter/Shutterstock

These are tumultuous times for online businesses in China as the government announces it will shut down all bitcoin exchanges based there.

After a meteoric rise, bitcoin has experienced one of its biggest blows in some time after the Chinese government revealed it will force the country’s biggest exchanges to close in the months to come.

Last week, the Communist government told organisations and individuals that they were banned from raising funds through initial coin offer activities, and that financial firms such as banks were to refrain from any unauthorised fundraising activity.

According to the The Wall Street Journal, bitcoin exchanges are now being clamped down on, with no trading to be done within Chinese borders. However, the government will continue to allow people to use bitcoin and also mine it.

China’s influence on global markets is not restricted to just traditional currencies, with the country’s biggest exchanges accounting for a fifth of all transactions over the course of the past month.

At one point in time, China’s influence on the cryptocurrency was dominant, having accounted for as much as 90pc of trading activity, but this has since diversified globally.

All of this has hurt bitcoin’s current trading price as, in the space of a week, it has slumped from a record high of $5,000, to $4,247 at the time of writing.

Ratcheting the rhetoric

The clampdown is seen as part of China’s efforts to regain greater control over its own currency, the yuan, after the surge in bitcoin’s price last year was attributed to eager Chinese buyers looking to sell yuan, fearing its collapse.

This made the government nervous as people could then move their finances outside of the country’s tightly controlled financial regulators.

One person close to officials of China’s central bank and various cybersecurity bodies said that “too much disorder was naturally a basic reason” for the ban.

One of bitcoin’s biggest influencers, Crypto Compare’s Charles Hayter, said to CNBC recently that for China “nothing is ever certain” when it comes to cryptocurrencies.

“The fears of capital outflows as well as money laundering are causing the Chinese state to ratchet the rhetoric,” he said.

A bitcoin beside Chinese yuan currency. Image: William Potter/Shutterstock

Colm Gorey was a senior journalist with Silicon Republic