China central bank warns bitcoin exchanges that violations could mean closure

By Brenda Goh

SHANGHAI (Reuters) - China's central bank said on Thursday it met with nine of the country's smaller bitcoin exchanges to discuss risks and problems in the bitcoin market, and warned them that they risk closure should they seriously violate the country's regulations.

The People's Bank of China (PBOC) said in a statement on its website that it had told the exchanges during the Wednesday meeting not to take part in financial activities such as margin lending or allow money laundering.

It said that the meeting came amid ongoing checks into Huobi and OkCoin, two of the country's largest trading platforms, which began last month. The central bank said at the time that the spot checks were to look into possible rule violations.

Beijing has ramped up efforts to stem capital outflows and relieve pressure on its currency, the yuan. 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.]

That, and the relative anonymity the digital currency affords, has prompted some to believe bitcoin has become an attractive option for tech-savvy Chinese to hedge against the yuan and skirt around rules limiting how much foreign exchange individuals can buy each year.

The PBOC's increased scrutiny of the industry since the start of the year has led the three largest exchanges to introduce trading fees and stop margin lending.

News of meetings between the various exchanges and the PBOC and other government agencies has caused the bitcoin price to swing wildly. On Wednesday, the price fell from a one-month high after sources at bitcoin exchanges in China said the PBOC had summoned some exchanges to a closed-door meeting.

The price of bitcoin recovered 1.9 percent on the BTCC exchange on Thursday from the previous day, trading at 7,545 yuan, equivalent to around $1,099.

The nine exchanges involved in the Wednesday meeting were CHBTC, BtcTrade, HaoBTC, Yunbi, Yuanbao, BTC100, Jubi, BitBays and Dahonghuo, the PBOC said. Industry insiders said the majority of these exchanges allowed other cryptocurrencies to be traded on their platforms besides bitcoin.

BtcTrade, Bitbays and BTC100 declined to comment on the meeting. Reuters was unable to immediately reach the other six platforms for comment.

($1 = 6.8658 Chinese yuan)

(Reporting by Brenda Goh; Additional Reporting by SHANGHAI Newsroom; Editing by Sam Holmes)