Bitcoin In Trouble As Chinese Exchanges Stop Taking Deposits In Yuan

Max 'Beast from the East' Smolaks covers open source, public sector, startups and technology of the future at TechWeekEurope. If you find him looking lost on the streets of London, feed him coffee and sugar.

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Virtual currency loses almost a third of its value in just one day

Bitcoin has lost more than a third of its value in just a few hours, after China’s virtual exchanges stopped accepting new deposits in local currency.

Two weeks ago, the Chinese central bank banned the country’s financial institutions from converting Yuan (also known as Renminbi) into digital currencies such as Bitcoin, and now the same rules have been extended to cover third-party payment processing companies.

BTC China, which recently emerged as the most popular Bitcoin trading platform in the world, was among the first to report the news on Wednesday afternoon, after its payment provider refused to authorise some transactions, reports the Financial Times.

The ban resulted in a major crash for the virtual currency, with the price on Tokyo-based Mt. Gox exchange dropping from $750 on Tuesday to just $455 on Wednesday.

Banks against Bitcoin

In just a few months, China became the world’s largest market for Bitcoin – a decentralised virtual cryptocurrency popular among people interested in keeping their transactions secret. It is not tied to any real money, but traded on various electronic exchanges to establish its price.

© Karen Roach - Fotolia (Medium)The Chinese regulators previously said they were concerned by the risks involved in trading Bitcoin, and they couldn’t have been too happy about its anonymous nature either.

Two weeks ago, the government had decided to restrict the ability of financial institutions to exchange Yuan into Bitcoin. On Tuesday, the same rules had been applied to payment processing companies.

“Due to new government regulations, BTC China will temporarily suspend CNY deposits. BTC deposits/withdrawals and CNY withdrawals are not affected, and will continue to operate in the interim,” said a statement from BTC China.

Technically, individuals in China are still free to trade Bitcoin at their own risk, as long as they don’t rely on a third party to process the payments.

The new rules led to a more than 40 percent drop in Bitcoin prices on exchanges based in China, and caused ripples throughout the digital currency world.

BTC China said all existing balances are completely safe, and transactions in other currencies are being processed as usual. However, no new deposits in Yuan are being taken at the moment. The same was true for Asia Nexgen.

Meanwhile in the US, Bank of America had recently acknowledged that Bitcoin offers “many benefits” over traditional currencies and has a “clear potential for growth”.

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