Following yet another sharp price drop due to the secretive, closed-door and private actions of China’s Central Bank, the bitcoin community turned today to angry rhetoric directed at PBOC.
“You can’t live in a fascist state and not expect the fascist state to come bursting through your door to slap you around, every now and then.” – says one bitcoiner. “I am about sick of China.” – says another. “It’s safe to say that China is going to keep saying something every time Bitcoin gets close to the value of Gold.” – says a third.
PBOC stands accused of taking measures against bitcoin every time price rises. Just as bitcoin surpassed gold parity, they announced the opening of an “investigation” into China’s big three exchanges: BTCC, OKCoin and Huobi.
Price fell sharply by around $300, but then slowly recovered, increasing by around $170 from the beginning of this month to reach around $1,070. PBOC again interfered. Telling Bloomberg they were to hold a closed door meeting with nine of China’s smaller bitcoin exchanges: CHBTC, BtcTrade, HaoBTC, Yunbi, Yuanbao, BTC100, Jubi, BitBays and Dahonghuo.
PBOC warned them to comply with regulations or risk being shut down. Price initially reacted by $80, but it recovered and even went higher as PBOC’s language was ambiguous. A word for word translation reads: “If there is a Bitcoin trading platform in violation of the above requirements [related to money laundering, foreign exchange rules, taxation and advertising],[and] the circumstances are serious, the inspection team will bring it to the relevant departments [for the exchange] to be closed down according to [the] law.”
It is not fully clear whether PBOC is referring to violations that happen after the above warning, or to violations that may have occurred in the past. The price’s reaction suggested the former which would have earned PBOC some praise for acting reasonably. But then, OKCoin and Huobi announced they are to pause bitcoin and litecoin withdrawals for a time estimate of one month to enact measures that allows them to comply with the requirements of PBOC.
Price reacted quickly, falling by almost $160 in minutes. It has now somewhat recovered, but denying people access to their own funds for a current time estimate of one month is always a worrying event. Some might also wonder, why is it just these two exchanges?
No one talks. We’ve tried to reach out to many, but they all have the same response: silence.
OKCoin and Huobi were by far the most popular bitcoin exchanges. Most western traders used one of the two, with suggestions that hedge funds and other financial institutions were engaged in high-frequency trading there.
Some hours before their official announcement earlier today, a western based trader stated his hands were shaking as while he was logged in on OKCoin, he was suddenly logged out. When he entered the password, it would not work. “It’s the correct password,” – he insisted. After some more comments full of typos because he was imagining the worst, “going on a bike ride” – he said.
Hopefully he is fine, but the actions of PBOC leave much to be desired as they are not explaining their aims. PBOC is not officially talking to the media, instead sending out rumors about “third party custodians,” with their brief announcements nothing more than bland, bureaucratic, grayness, which says little to explain their intentions.
Instead, all we get is drip drops, with exchanges arbitrarily probably asked to enact trading fees although their absence breaches no laws, as well as to remove margins or futures for no given reason that has any relevance to the country’s laws.
This is no way to behave for the world’s second largest economy which has aspirations to be a global player. One of the world’s most powerful central bank cannot arbitrarily take actions that affect global markets without even explaining their aims or laying down proposals on what it wishes to achieve and how.
PBOC’s actions do not affect just Chinese citizens. Many westerners used those two exchanges and probably other bitcoin exchanges based in China. Many of them are now suddenly shut out and though we are told temporarily, until it is proven so we do not quite know.
When America wished to make an example to show its intentions of applying the current laws to bitcoin related activity before it was clear it was so applicable, they picked a target which had seemingly intentionally engaged in actual money laundering. A target who happened to be running one of the far smaller bitcoin exchanges.
A bigger exchange would have affected many who would have turned their ire against the state for intentionally causing them the loss of much wealth. In any event, China has made clear its intentions that they require exchanges to comply far more than American authorities did back in 2013. Someone to make an example may not even be necessary.
If violations are found from now on then enforcement would be appropriate, but doing so without prior warning at the expense of so many, both Chinese and non-Chinese citizens, serves only to show that Chinese authorities do not take into account the considerations of others.
Regulations with clear rules, as well as audits, are desirable. Potentially shutting down exchanges before the law is even laid down and clarified it applies to this very new technology is a draconian action by out of touch far older generations who probably can’t even use an e-mail, let alone have any clue about bitcoin, the blockchain or today’s interconnected global markets.
Images from Shutterstock.