The Friday reports of China planning to shut down local bitcoin exchanges have since been repeatedly backed up, though the authorities are yet to make the ban official. However, an interesting new wrinkle in this plan has also emerged.
According to unnamed sources cited by Bloomberg, the ban on exchange-based cryptocurrency trades will not extend to over-the-counter (OTC) transactions.
Broker-based OTC trades are typically high-volume in nature, so the effect of the rumored ban would be to shut out regular Chinese bitcoin users, by making it impossible for them to buy or sell the virtual currency.
“Old users will definitely still trade, but the entry threshold for new users is now very high,” Zhou Shuoji, a partner at cryptocurrency investor FBG Capital, told Bloomberg.
According to sources quoted by The Wall Street Journal, Chinese people were using bitcoin to bet against the value of the yuan and move money outside the country, and the authorities decided to issue the ban because the bitcoin market was creating “too much disorder.”
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China’s role in the bitcoin ecosystem is particularly notable for the country’s major bitcoin-mining operations, but there are plenty of exchanges elsewhere.
The news of the impending exchange ban, which came soon after China banned initial coin offerings (ICOs), had an immediate effect on bitcoin’s price--within Friday, it knocked almost 8% off its value relative to the U.S. dollar, making one bitcoin worth around $4,270. Other cryptocurrencies, such as the ether currency that’s based on the Ethereum network, have also taken a hit.
The slide since then has been slower, though it is continuing. At the time of writing on Monday morning, a bitcoin is worth around $4,180. Little more than a week ago, before China’s regulatory moves, the volatile cryptocurrency hit an all-time high of $5,000. Bitcoin has still had a good year, though--at the end of 2016, it had only crossed the $1,000 threshold.