The rumored deadline for China’s banks to cut off bitcoin exchanges from deposits has arrived, with no official word from the authorities that such a policy even exists. Chinese exchange BTC China claims it has no intention of changing the way it does business.
The story has contributed to turbulence in the bitcoin markets since it first began circulating as a rumor last month. Bitcoin saw its value fall beneath $400 briefly for the first time since November 2013. This is despite the People’s Bank of China (PBOC) itself insisting it had no intention to ban digital currencies.
Some exchanges have received formal and verbal notices from their banking partners, and there have been reports Chinese companies are looking to move some of their operations offshore.
Bobby Lee, CEO of BTC China, says his exchange has not heard of any changes, either from the central bank or any of the many banks with which it does business.
Business at BTC China will proceed as usual after this week, with customers replenishing their accounts via bank deposits or the ‘voucher’ system the exchange introduced in response to the first banking scare in December last year.
BTC China’s banking partners have reported seeing rumors of a new policy in the media, he said, but that was all.
“Our situation hasn’t changed. We’ve been talking to banks, the ones we have personal relationships with, and so far we’ve not received any notice to close our business with them.”
Lee said that all customer funds remained on hand and, even if one of BTC China’s banks decided to end its relationship with the company, it would simply move the funds to another account.
Rumors vs reality
There are three important points to remember in this series of events: firstly, despite some stating otherwise, China has not ‘banned bitcoin‘.
Secondly, any leaked opinions so far referred to funding bitcoin exchange accounts through bank deposits. Bank accounts were never in danger of being frozen, and the ability to withdraw funds from exchanges to bank accounts was not in question. Chinese exchanges also work with multiple banks at a time, with the ability to transfer funds between them.
Thirdly, and most significantly, all reports from China concerning banks and bitcoin exchanges so far are unofficial. To date there has been no ruling or policy statement by the People’s Bank of China on the matter, and any actions taken by Chinese banks were precautionary only.
“We’re still fully holding all customer assets, I want to emphasize that,” Lee continued.
“There’s nothing missing, there’s no misappropriation or frozen funds. All our funds are liquid and fully accessible. We don’t invest any of our funds in special ‘wealth management products’, or anything like that. Everything is liquid funds.”
The current Chinese attitude might be called a ‘tacit policy’, in which the government makes no official statements but makes its intentions known via subtle leaks to the media and asides to contacts in the banking industry. Authorities may well disapprove of bitcoin and discuss it with their associates, without the need for any proclamation.
Bitcoin operates in similar environments in other large economies, including the US, where regulatory authorities seem at times permissive towards digital currency innovation and at others less tolerant, depending on the department in question.
Under the status quo, bitcoin service businesses must register as ‘money transmitters’ in 48 states while the IRS rules bitcoin is property, not money, for taxation purposes.
BTC China’s voucher system, which it pioneered and other Chinese exchanges have used as well, is similar to buying a gift card or prepaid card for iTunes, Google Play or Amazon.
The main difference is the cards can also be used to withdraw funds, and then re-sold for cash to other users to fund accounts. BTC China sells the vouchers directly to resellers, who also sell them online.