PBOC quizzes bitcoin exchange as yuan slide spooks authorities
Central bank tells virtual currency site to ‘rectify mistakes’ as value plummets following yuan spike, having previously surged as mainland investors sought yuan hedge
The People’s Bank of China’s is stepping up policing bitcoin trading on the mainland as Beijing is spooked by fears that the digital currency would ratchet up pressure on a depreciating yuan.
PBOC’s Shanghai headquarters yesterday said it had convened a meeting with executives of BTC China, a Shanghai-based bitcoin exchange, to warn it of risks in rampant trading of the digital currency.
The online trading platform was also required to “rectify mistakes”, the central bank said in a statement, without elaborating.
Bitcoin is regarded by a group of mainland speculators as a tool to hedge against yuan devaluation; some of them also use bitcoin to bypass China’s capital control to direct their assets abroad.
The PBOC barred mainland companies from accepting bitcoin transactions.
But trading platforms which technically act as information providers, rather than offering payment and settlement services, can still operate.
BTC China chief executive Bobby Lee would not comment on the issue.
The digital currency surged to a three-year high of US$1,139.89 (HK$8,840) on Wednesday before retreating 20 per cent to US$885.41 on Thursday as the yuan rapidly strengthened.
Flat trading of bitcoin was seen yesterday with price hovering below US$900.
Mainland speculators began flocking to bitcoin in the middle of last year; trading volume swelled.
A slumbering stock market, heightened expectations of a weaker yuan and even the advantage the digital currency offers in dodging the anti-corruption drive resulted in a buying euphoria.
Buoyant bitcoin trading could exacerbate bearish sentiment on yuan while triggering capital outflows that the existing regulatory system failed to cover.
The yuan slid about 7 per cent last year and is edging closer to a psychologically important seven level against the US dollar.
Millions of mainland residents, battered by worries of a further yuan depreciation, have been aggressively seeking to convert yuan assets into foreign currencies and remit part of their wealth outside China.
The central bank is taking a series of drastic actions to stabilise the yuan’s exchange rate including a tightened control on overseas investment by mainland firms and stricter review process on currency conversions.