China's Bitcoin Exchanges End No-Fee Trading in Market Shake-Up

China's 'Big Three' bitcoin exchanges have taken the combined decision to drop trading fees following central bank talks.

AccessTimeIconJan 23, 2017 at 12:00 p.m. UTC
Updated Dec 11, 2022 at 2:02 p.m. UTC

China's 'Big Three' bitcoin exchange businesses are taking new steps to "curb speculation" and "prevent volatility" in the nascent digital currency market.

Announced this weekend, BTCC, Huobi and OKCoin – the country's largest bitcoin trading platforms by volume – jointly revealed their intention to end their years-long practice of offering no-fee bitcoin trades, introducing a 0.2% fixed-rate fee on all buy and sell orders for bitcoin and the alternative digital currency litecoin beginning 24th January.

The announcement is the latest that finds China's major bitcoin trading platforms responding to apparent regulatory pressures from the People's Bank of China (PBoC).

Following bitcoin's rise to near all-time highs at the beginning of this year, the startups have faced new scrutiny from the central bank, which appears to have taken a more active interest in their offerings. News came just days after all three exchanges ended margin trading, and talk soon followed that pricing changes could be forthcoming.

BTCC, the most vocal of China's major exchanges since discussions were made public on 6th January, said it is reconsidering how it would price trades.

Over-the-counter trader Zhao Dong indicated his belief that the policy shifts will impact liquidity in the markets by making high-frequency trading less appealing, changes that he foresees having affect on other exchange users.

Yet, Zhao cautioned he believes the move could be temporary, telling CoinDesk:

"The price suggested is even higher than most foreign bitcoin exchanges. I don't think Chinese exchanges will insist on such high fees due to market competition, especially if there are other exchanges that charge zero fees."

At press time, the announcements did not seem to be having a negative impact on the price of bitcoin, which (while volatile) traded higher on 22nd January than it did over much of the proceeding week.

Elsewhere, the decision was greeted with enthusiasm. Broad and Bright partner Roland Su, legal lead for the China-based blockchain consortium Hyperledger, told CoinDesk he believes fees will help the market become less speculative.

"The trading volume will drop, but won't hurt the price too much," he predicted.

The cop effect

In interview, China-based traders and market representatives preferred to emphasize the positive aspects of the recent announcement, and how, while the central bank has yet to ban bitcoin trading, it had made clear that change was required.

Bobby Lee, CEO of BTCC, said that the announcements represented a recognition by exchanges that the PBoC was concerned about prices rising "too high, too fast", and that this, as well as suspicions it may be used for capital flight, helped spark the action.

"The regulators have their opinion, they want more real volume. We got together to be one step ahead," Lee said.

Lee went on to note that bitcoin is not yet regulated in China, and that as such, the PBoC is also fairly restrained in how it can oversee the nascent industry. Overall, he compared this to the arrival of a cop on a highway, noting that the natural reaction of drivers is to slow their speed in such a scenario, even when no action is taken on behalf of law enforcement.

Likewise, representatives from Huobi indicated that most of its customers understood the reason for the decision and that it met customer expectations.

The exchange also sought to downplay concerns that it could face new business pressures as a result in the change in fees, with a representative stating:

"Huobi's service is as good as before and it still attracts an international market."

Representatives from OKCoin declined further comment, emphasizing the firm's written statements.

Market reactions

The reactions from general enthusiasts and traders were more mixed, however.

On social media, some praised the news as a way to bring exchanges – as well as bitcoin as a technology – more in line with expectations from local regulators. Others celebrated what they considered to be an end to practices that they believe to be contributing to an overrepresentation of China-based exchanges in global exchange volume.

Still, other observers said that international exchanges could move to lower fees in a bid to stoke competition.

When asked if there was any agreement that China's exchanges would hold to the pricing model for a set time, Lee provided no firm answer, stating that it remains to be seen whether certain "behaviors" will be required of domestic exchanges.

"I think the future will tell us. I don't know the answer," he said.

Other more obscure theories abounded as well, with market analyst George Samman stating that he believes the new fees could push China-based traders toward alternative digital currencies and blockchain-based assets with higher potential returns.

Sticking with the plan

Notably, the announcement will not affect another bitcoin exchange that had just last week promised to follow what it called China's successful no-fee policies.

In statements, representatives from London-based Coinfloor said the exchange remains committed to the offering and that the exchange is excited about winning new business.

"We always rethink things but we came to the same conclusion – no trading fees is the way to go," founder Mark Lamb told CoinDesk.

Such statements suggest bitcoin's exchange market could see more changes in the days and weeks ahead as the market adjusts to the news.

Yuan image image via Shutterstock


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