News of Bitcoin ban leads to underselling and bargain-hunting

After the Initial Coin Offering (ICO) was banned, Bitcoin receives another blow. On the evening of September 8th, news came that the supervisory authority decided to shut down the virtual currency trading platforms in China, which involves all the platforms between the virtual currency and legal tender represented by OKCoin, HUOBI and Bitcoin China. As a result, the price of Bitcoin fell by up to 20%. In particular, within 48 hours after the release of the news, Bitcoin China, HUOBI, and OKCoin——all the three major Bitcoin trading platform said that they had not receive any notice yet and would take a wait-and-see approach for the possible ban order. As for Bitcoin investors, some are eager to undersell while some take the opportunity to bargain-hunt.

The trading platforms have not received any notice yet

On the evening of September 8th, it was reported that regulators indicated that Bitcoin exchanges served as channels for money laundering and price manipulation and should be closed as soon as possible. Bitcoin brings no practical application but illegal economic activities and blackmail. Beijing Business Today tried to verify this news with several regulatory department officials but received no definite answer. As of press time, Bitcoin China, HUOBI, and OKCoin said that they had not received any notice.

After the ban released, the platform made response. On September 9th, Bitcoin China, HUOBI, and OKCoin stated on their official websites that they did not receive notice from the regulatory body. At the same time, the three major platforms are ready for the supervision. They also indicated that if the news turned out real, on one hand, they would firmly support the regulatory policy, follow related instructions, and resolutely protect customer’s asset security; on the other hand, the platform would also stop the current Bitcoin to RMB transactions and transform to an information platform for digital asset point-to-point trading. In addition, the three major platforms said that the previous report mentioned that regulators did not declare Bitcoin illegal, nor prohibite point-to-point transactions among users.

A Bitcoin trading platform insider disclosed to Beijing Business Today: “we are not afraid of the ban; we would take a wait-and-see approach. We would do whatever regulators require, and the priority is to protect investors’ interests.”

Some investors undersell while some bargain-hunt

When the Bitcoin market is full of rumors, Bitcoin transaction is robust. Some investors undersell Bitcoin to avoid further loss, and the other are busy bargain-hunting for benefits. Bitcoin investor Mr. Li told reporter of Beijing Business Today: “Bitcoin depreciated sharply because of regulatory policies before, this time I rush to sell out my Bitcion when I feel the tendency. I will be cautious to enter this market in the future.” However, some investors believed that Bitcoin price will rise. “Taking advantage of this fall, I hastily bought two coins, if I can’t get my money back in the short term, I would hold them for a long time,” another investor Mr. Luo said.

Bitcoin believer Mr. Wang said: “Bitcoin is the belief of those bargain-hunters. For them, every Bitcoin price fall caused by policy disturbance offers opportunity for bargain-hunting.”
Actually, after news came on September 8th that regulators were going to close virtual currency trading platform, the per bitcoin price decreased by over 15% from about 28,500RMB to nearly 23,000RMB, that is nearly 5,500RMB. As of press time, the per bitcoin price leveled off at about 23,000RMB.

On September 4th, the central bank issued the Public Notice on Preventing Risks of Fundraising through Coin Offering and made it clear that the issuance of tokens, including ICO is essentially an unauthorized illegal public fundraising conduct. The central bank also demanded that all kinds of tokens issuing financial activities should be stopped immediately. Affected by the ICO collapse, the per bitcoin price decreased by nearly 7,000 RMB but rebound back within a few days.

The price of bitcoin tumbled

In fact, supervision and control of Bitcoin isn’t something new. In December 2013, the central bank and other five ministries issued the Notice on Preventing Bitcoin Risks. According to the notice, Bitcoin is not a real currency but specific virtual goods. The notice also requires that the financial institutions and payment agencies should not do business related to Bitcoin. At that time, per bitcoin price tumbled down from the peak of 8,000 RMB to the bottom of 1,000 RMB.

At the beginning of this year, the central bank conducted field investigation in Bitcoin China, HUOBI, and OKCoin, the three largest Bitcoin exchanges in China. The central bank put forward four regulations for Bitcoin exchanges: shall not violate rules and engage in fundraising through coins; shall not get involved in money laundering; shall not violate anti-money laundering, foreign exchange management, payment and settlement and other financial laws and regulations; and shall not violate tax, business advertising management and other laws. As for the trading platforms with activities that violate regulations mentioned above, if the consequences are serious, the inspection team will report to the departments concerned to close such platforms according to law. At that time, the per bitcoin price did not tumble like that in 2013 but soared up. Since this year, the per bitcoin price reached record high in succession with the peak above 30,000RMB.

Xue Hongyan, Director of Internet Finance Center in Suning Financial Research Institute, believed that Bitcoin is investment goods that enjoy global flow, and its transaction may involve issues such as market manipulation, price bubbles, money laundering, and facilitation for criminal conducts so that we need to strengthen transaction supervision particularly. As the OTC transaction is hard to control, we should first emphasize norms of floor trading. By making it more convenient and regulated, we can bring the transaction as much as possible to the floor.

Ambiguous supervision tendency

News came earlier that the central bank planned to issue regulations targeted at Bitcoin trading platform but the plan miscarried at the end.

Mr. Zhou Xuedong, deputy to the National People’s Congress and director of Operation and Management Department in the People’s Bank of China, said to media that China have drawn regulatory redline and established negative lists for Bitcoin and other virtual goods trading platforms, and have demanded all platforms should not cross the line. Some analysts pointed out that regulation tendency toward Bitcoin is ambiguous, on one hand, the blockchain technology that Bitcoin based is recognized by the majority; on the other hand, Bitcoin booming triggers problems such as market manipulation, price bubbles, money laundering and inviting of criminal activities.

Actually, as for Bitcoin price, the regulatory factors play a weaker role in China. Mr. Huang Zhen, director of Financial Law Institute in Central University of Finance and Economics, believed: “if Bitcoin trading banned in China, it is hard to accurately predict its price curve. At the beginning of this year, China stopped Bitcoin trading for risk inspection, and then the Bitcoin trading shifted to Korea and Japan. At present, Japan’s trading accounts for 45% of the total, ranking first in the world. In the past, 80% to 90% of the Bitcoin trading happened in China.”

This article originally appeared in Beijing Business Today and was translated by Pandaily.

Click here to read the original Chinese article.