Last Friday (Jan. 6) was tough for bitcoin users around the world. Values that had soared to near record highs fell 23 percent, then recovered a bit. At the time of writing, the price of bitcoin sat at $892.62. While the sudden drop was at first not attributed to any one cause in particular, some answers are now coming out of China.
Last week, China’s central bank, the People’s Bank of China (PBOC), had advised investors to be cautious when investing in digital currency. The central bank’s comments come as Beijing escalates a campaign to check capital outflows, said Reuters, and to slow the depreciation of the yuan.
Current regulations limit foreign exchange to an annual maximum of $50,000, but some believe that people are using bitcoin and other digital currencies to circumvent the exchange cap. By some estimates, the yuan lost nearly 7 percent against the U.S. dollar in 2016.
BTCC, the major bitcoin exchange in China, held a meeting with the Chinese central bank on Friday last week so that the PBOC could reportedly better understand the bitcoin exchange platform, the risks involved and remind the exchange to perform adequate self-checks and abide by the law. Both the meeting and statement from the central bank led some bitcoin investors to fear China was gearing up to crack down on the digital currency.
Bitcoin exchanges in China could account for more than 90 percent of current global bitcoin trading if internal estimates are accurate. Additionally, some 80 percent of the world’s bitcoin mining operations are conducted in China. A shift in Chinese demand or a sudden increase in investor concern in the nation of 1.3 billion could very well dramatically affect the digital currency’s value.
But it looks as though bitcoin’s position in China remains the same for now. The digital currency currently isn’t regulated, though the PBOC has said that bitcoin is a “virtual good” rather than legal tender. Bobby Lee, CEO of BTCC, reportedly said that few people use bitcoin to get around exchange regulations and further that the BTCC hadn’t been explicitly told to check capital outflows by the PBOC.