Chinese Bitcoin Exchanges Prepare to Move Operations Overseas

NEWS
Pete Rizzo
Apr 11, 2014 at 21:41 UTC  |  Updated  Jul 25, 2014 at 16:15 UTC

Major China-based bitcoin exchanges Huobi and OKCoin are reporting that they have received word from banking partners indicating that certain deposit services would be terminated by 14th April.

The news follows the 10th April statements issued by BTCTrade, BTC100 and Huobi confirming that they had bank accounts terminated by financial partners. OKCoin was previously contacted by a third-party payment processor, which prompted it to stop servicing deposits via prepaid voucher with this partner on 2nd April.

While the two new announcements brought news of more account freezes, they were perhaps most notable as they illustrated that major China-based exchanges are already looking to put in place contingency plans to maintain operations should the PBOC decide to further restrict its state-backed financial service providers from interacting with the industry.

Huobi indicated in its post that it is "actively developing business cooperations with onshore financial institutions", and that it has "reached agreements with many institutions to ensure that Huobi can have normal RMB deposits and withdrawals".

The exchange also implied it is open to continuing operations outside China, stating:

"Huobi has already registered for and opened overseas incorporation and offshore accounts, and can use them at any time."

Similarly, OKCoin offered a two-point restructuring plan in its post that included the potential for opening an overseas website designed to provide a "more stable, more secure trading platform", which it suggested is currently under construction.

The announcements provide the latest evidence that the original rumours of enhanced restrictions first reported by Caixin on 27th March will come to pass.

No official documentation received

Though the exchange received new notices, neither provided any hard evidence as to the change in PBOC policy.

Huobi's statement notes:

"No bank branch has received official documents requesting the termination of business relationships with bitcoin exchanges".

Its statement continued, explaining why information from major China-based exchanges has not been consistent in recent weeks.

"Each bank's interpretation and execution of the policy is different, and so it may be that the current situation is an over(ly careful) reading of the policies by the authorities, and so it is not necessarily the case that all banks will stop business with bitcoin exchanges."

More details

OKCoin released its statement on 6:00 GMT confirming that it had received oral notice from China Merchants Bank that its deposit services would be terminated.

Huobi's statement followed shortly thereafter at 9:00 GMT, and stated that China Merchants Bank had requested to terminate the exchanges withdrawal services by 14th April.

Said Huobi in an online post:

"User withdrawals will not be affected, and Huobi will announce immediately any additional news."

OKCoin said withdrawals were not affected either, and that its other bank accounts were still active. In addition, it offered a plan for how it will continue operations, using a recharge code, or voucher, service for deposits and withdrawals.

Users would be able to use the recharge service to withdraw yuan, before transferring the code. There is no fee for withdrawals or deposits to code. These codes can then be traded among exchange users.

The exchange also continued its optimistic outlook, stating:

"We believe firmly that policy adjustment won't make China Bitcoin decline, but [provide] a test for exchange platforms."

Huobi issues warning to PBOC

Of the two responses, Huobi's was perhaps the best at putting the events in general context, stating that it believes the PBOC is tightening restrictions due to concerns about money laundering and the security of its domestic financial system.

The statement suggested that the PBOC should be careful not to force its exchanges to close down or relocate abroad, arguing that exchanges would be the easiest points in the system to regulate.

Read the statement:

"If online trading platforms that are following the rules have to stop services, bitcoin transactions will go offline where they will be unmonitored, and will result in even more difficulty regulating."

The news follows the 11th April statements made by PBOC governor Zhou Xiaochuan, who said that the central bank will not ban bitcoin despite its latest policy shift.

Additional reporting contributed by Rui Ma.

Image credit: Traditional Chinese boat via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

ChinaOKCoinPBOCHuobi