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Is Bitcoin Exchange Trading Legal In China ?
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The head of Chinese bitcoin exchange BTCC on Thursday denied media reports that the central bank had ruled it was offering margin loans illegally, and he said the platform is operating normally.
However, Chief Executive Bobby Lee told Reuters the company had stopped offering margin loans last week alongside competitors such as Huobi and OkCoin, after “discussions” with the People’s Bank of China (PBOC). He gave no details.
“No one has said that margin trading for bitcoin is illegal,” Lee said.
He said the media reports were “not based on any official documentation. So as far as I’m concerned, at this moment, we have not received any official documentation, verbal or written feedback from the PBOC with regards to their conversations with us over the last two weeks.”
The PBOC declined to comment.
Beijing Youth Daily, a state-run newspaper, said on Thursday that a PBOC investigation found that China’s three largest bitcoin exchanges were illegally conducting margin trading, and such activity stoked abnormal market volatility.
Another state-owned media, Economic Information Daily, said that the Shanghai branch of China’s central bank had found “hidden risks” in BTCC.
On Jan. 11, the central bank launched spot checks on BTCC, Huobi and OkCoin to look into a range of possible rule violations, amid increasing government efforts to stem capital outflows and relieve pressure on the yuan currency.
While the yuan weakened 6.6 percent against the dollar last year, its worst performance since 1994, the bitcoin price has soared to near-record highs.
Late on Wednesday, after some Chinese media reports were published, the price of bitcoin fell nearly 8 percent on the BTCC exchange to 5,724 yuan, equivalent to around $835.
By Thursday, the price had recovered to around 6,120 yuan.
Spokeswomen for OkCoin and Huobi confirmed that their platforms had also stopped offering margin loans, but both did not respond to queries on whether they had received official notices from the PBOC.
Lee of BTCC also said the exchanges had discussed introducing trading fees and were open to that, but said the regulator might have to get involved before this could happen.
The absence of trading fees has encouraged volumes and boosted demand at the Chinese bitcoin exchanges.