China Bitcoin Crackdown Leads To Exchange ShutdownBy: Toni Matthews-El - April 6, 2014
BTC38, one of China’s biggest bitcoin exchanges, informed its users that 3rd party payment processors would be suspended.
The news came following a major crackdown by the People’s Bank of China. China’s major financial institution has previously come out strongly against the bitcoin. As the digital currency gains momentum despite recent controversy, the PBOC has moved more aggressively to weaken the ability to exchange it for Chinese yuan.
There’s a reason why the Chinese government may feel very uncomfortable with the nature of the bitcoin and its booming popularity within the country.
Chinese consumers who exchange their yuan for bitcoins can then use the digital currency in a largely untraceable manner. This helps Chinese bitcoin owners avoid capital controls and navigate heavily regulated markets under the radar.
The ability to avoid government regulation was initially one of the strongest selling points of the bitcoin, especially for those seeking to avoid taxation.
The IRS has already addressed the matter of bitcoins. Instead of viewing them as currency, the government agency has declared them a taxable form of property.
Despite the concerns this raised among bitcoin owners and miners (persons who discover new algorithms, which generate new bitcoins) it was an act that seemed to be offering the bitcoin some much needed legitimacy.
China does not seem to be interested.
Despite the hard-line stance of the country’s head banking institution, the digital currency is said to be otherwise thriving in China. It’s reported that the rate of bitcoin purchases in China stands at 10,000 bitcoins per hour. This rate far exceeds that of any other country.
While users have been readily storing the bitcoin, recent changes in the US and abroad have made some nervous about spending them. Bitcoin owners may want to get over their nervousness sooner rather than later.
The bitcoin has been sliding downward in recent weeks. Falling from $600-$500 range, it currenty is worth about $436.
While there’s always a chance the bitcoin’s value could surge again, the unstable nature of the digital currency means it may be wise to try and exchange it for a more acceptable currency or spend it where it’s still legal tender.
The move should be made now, ahead of any future value-endangering government crackdowns.
Image via Wikimedia Commons