China said to halt bitcoin exchange trading by end-September

The plan was distributed by a People's Bank of China-led group overseeing Internet finance risks, said the people, who asked not to be named because the information is private.
The plan was distributed by a People's Bank of China-led group overseeing Internet finance risks, said the people, who asked not to be named because the information is private.PHOTO: REUTERS

SHANGHAI (BLOOMBERG) - China has notified regional regulators that it aims to stop exchange trading of cryptocurrencies by the end of September, according to people familiar with the matter.

The plan was distributed by a People's Bank of China-led group overseeing Internet finance risks, said the people, who asked not to be named because the information is private.

The notice suggests policy makers will move quickly with their most far-reaching measure to rein in the growth of cryptocurrencies. China's crackdown, which includes a ban on initial coin offerings announced last week, has fueled a 30 per cent sell-off in bitcoin from its all-time high on Sept 1.

The digital currency tumbled on Thursday after BTC China, one of the country's largest cryptocurrency venues, said it would stop handling trades by month-end. Rivals OKCoin and Huobi said they haven't received any regulatory orders to halt. The PBOC didn't immediately reply to a faxed request for comment.

The cryptocurrency ban will only apply to trading on exchanges, people familiar with the matter told Bloomberg on Monday. Authorities don't have plans to stop over-the-counter transactions, the people said.

China accounts for about 23 per cent of bitcoin trades and is also home to many of the world's biggest bitcoin miners, who use vast amounts of computing power to confirm transactions in the digital currency.

While Beijing's motivation for the exchange ban is unclear, it comes amid a broad clampdown on financial risk in the run-up to a Communist Party leadership reshuffle next month. Bitcoin's surge over the past few years has fueled concerns of a bubble and prompted warnings of a potential crash from skeptics including JPMorgan Chase & Co's Jamie Dimon and billionaire investor Howard Marks.

Some market observers have speculated that China will allow cryptocurrency exchanges to re-open once the government has measures in place to provide greater oversight.

Matt Roszak, the chairman of Washington-based Chamber of Digital Commerce and an investor in BTC China, said he anticipates that the exchange will resume operations by year-end.

"That is the expectation based on months of discussions - the timing of which may be impacted a bit with the ICO phenomenon," Roszak said in an email. "China is preparing to provide licensure for less than a handful of exchanges as it grapples with the meteoric increase in cryptocurrency trading, and speculation on ICOs - licensure and engagement with government will help propel this industry forward."