Popular digital currency exchange BTC-e announced today it would begin trading in Chinese 'offshore yuan' (CNH), becoming the first international bitcoin exchange to offer both US dollars and yuan, and opening a field of new opportunities for currency speculators.
"We are pleased to inform that new trading instruments with Chinese offshore Yuan has been added. Now btc-e clients can trade 3 new instruments. A unique trading instruments that enables you to benefit either from price fall or increase are now available in your btc-e MetaTrader4 and WebTrader platforms under following symbols: USD/CNH (available on WebTrader only), BTC/CNH, LTC/CNH."
'Offshore yuan' (CNH) refers to the amounts of Chinese yuan (CNY), also called renminbi (RMB), available for trade on international markets by businesses, usually at slightly higher value than the official version thanks to the added accessibility.
Offshore yuan is the fourth fiat currency offered for trading on BTC-e, the others being US dollars, Euros, and Russian rubles. It also allows trading between these currencies, as well as bitcoin and a selection of seven alternative cryptocurrencies including litecoin, namecoin and peercoin. To fund a BTC-e account with CNH, users must wire money via a National Australia Bank (NAB) account in Sydney.
BTC-e's news came just as a local Chinese exchange, Bter, announced it will halt deposits from banks due to advice related to expected stricter controls over, or outright ban on, interactions between digital currency exchanges and Chinese banks.
Limited trade only
Thanks to strict capital controls, yuan is not freely tradable on world forex markets and its value is more rigid. It is not legal tender in Taiwan, Hong Kong or Macau, but often accepted and banks there offer yuan-denominated accounts. Hong Kong started the first offshore market in 2004.
Banks in Singapore and London also allow trading to and from CNH, and Taiwanese banks were permitted to open yuan accounts beginning 2012. Forex convertibility is limited to businesses for trade, investment and borrowing purposes and there are few, if any, chances for individuals to join in.
The Chinese government has allowed the yuan to float within a limited range since 2006, when a US dollar peg was removed.
Bitcoin another option
These controls are often listed as one of the main reasons for bitcoin's popularity with speculators and wealthy investors in China – it offers them a far easier option to move money out of the country, trade it into another more liquid currency and invest in a wider range of foreign alternatives. Investment opportunities within China itself are limited largely to real estate or to a lesser extent, shares in local companies.
Despite reports last week that the People's Bank of China (PBOC) was about to clamp down with a complete ban on banks doing business with bitcoin exchanges, companies there have reported no official announcement yet. Still, the international bitcoin price fell below $500 after the news and remains around $445.
BTC-e is one of the world's three most popular bitcoin exchanges, and also the least compliant in the traditional financial sense, requiring only an email address to open an account and trade in any of the available currencies. Funding accounts with fiat is tricky, however, without going through a more compliant bank or payment processing company.
Yuan & dollars image via Shutterstock