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Chinese Bitcoin Exchange Huobi to Stop Voucher Deposits Amid Regulatory Uncertainty

(@pete_rizzo_) | Published on April 3, 2014 at 17:00 BST

China-based bitcoin exchange Huobi is reporting via its website that it has not yet received word from any of its four third-party payment processors that they will be taking action to close its trading accounts.

The post follows reports yesterday (2nd April) from competitors that they had been contacted by financial partners and that, as a result, some deposit services would be at least temporarily frozen.

However, Huobi has said that one of its processing partners did call it directly to talk about the potential risk of continuing the partnership. The processor, which was not named in the release, reportedly wants to very strictly enforce guidance from China’s central bank that was issued on 5th December last year.

Perhaps most notably, Huobi will be halting voucher deposit services due in part to recent reports that the People’s Bank of China (PBOC) is looking to further restrict domestic financial institutions from working with bitcoin exchanges effective 15th April.

Huobi works with third-party processors ICBC, Agricultural Bank of China (ABC), China Construction Bank (CCB) and China Merchants Bank (CMB).

More service closures

Huobi says that none of its financial partners have received formal notices from the PBOC confirming or denying the rumors first reported by Chinese news service Caixin earlier this month.

As mentioned, yesterday’s announcements by rival exchanges OKCoin and FXBTC indicated that some deposit services would be halted due to unwillingness by financial partners to work with the bitcoin businesses in the current regulatory atmosphere.

It is unclear if any of those account closures were made in response to official notice or were proactive measures given that there is a growing consensus that Caixin’s initial news report accurately reflects PBOC’s change in enforcement.

Key to the situation is whether the People’s Bank will look to more actively enforce earlier guidance that China-based exchanges could not work with third-party processors.

Major China-based exchanges have been circumventing this rule by accepting deposits into commercial accounts, however, it now seems the new guidance is meant to close this loophole.

Freeze on voucher deposits

Citing uncertainty regarding the current regulatory environment in China, however, Huobi did indicate that it plans to shut down prepaid voucher deposits effective from midnight, 5th April.

Voucher services played a key role in the revitalization of the Chinese bitcoin market following the PBOC’s 5th December guidance, in particular helping BTC China regain volume this January.

Further, Huobi indicated that its bank transfer deposit services are now being manually serviced 24 hours a day to ensure customer funds are deposited quickly.

The voucher system was different than a third-party processing agreement, as anyone who wanted to enter the bitcoin market would need to first purchase a voucher code, which they could in turn use to buy bitcoins. Withdrawals worked on a similar system.

The exchange reported that renminbi withdrawal services, as well as bitcoin and litecoin deposits and withdrawals, were not affected.

Inconsistent reporting

Despite the lack of negative news from ICBC, ABC, CCB and CMB, Huobi was unable to confirm whether or not the update is indicative of its ability to operate smoothly in China. It indicated that any news it has heard on the subject has been reported by the media, and that it has no way of evaluating whether or not these reports are accurate.

Translations of its statements indicate that it clarified that the news it was providing was all firsthand, but that the news received across platforms has been inconsistent.

It suggested the difference could be indicative of how certain regions or service providers are responding to the news, but provided the caveat that this was merely speculation.

Price trends up in China

As of press time, the price of bitcoin on the CoinDesk USD Bitcoin Pricing Index (BPI) was down roughly 2% for the day. The price was $428.80, down from an open of $437.51.

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However, the situation in China was different. Prices were up 0.62% for the day’s trading. The price of bitcoin on the CoinDesk CNY BPI, which tracks trading on BTCChina and OKCoin, was ¥2,593, up from an open of ¥2,575.

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