Bitcoin's growing popularity in China may have caused the government to begin to perceive it as a threat to local currency, especially as Chinese investors bought up bitcoin and bet against the yuan past year.
China accounts for 23 percent of all Bitcoin trades and houses some of the most successful Bitcoin miners. BTC China, also one of China's three largest exchanges, and China's central bank did not immediately respond to Reuters' requests for comment. While existing users will likely still trade, according to Zhou Shuoji, a founding partner at FBG Capital interviewed by Bloomberg, it will make it more hard for new users to start trading Bitcoin-thereby limiting Bitcoin's potential growth.
The news was initially taken as a disallowance of trading between virtual currencies and legal tender in China.... however, it was further revealed that the intent is to target unauthorized trading at any of the virtual currencies.
A notice from the Banking Regulatory Committee led by the People's Bank of China announced on September 4 an immediate ban on ICOs. Bitcoin has jumped about 600 percent in dollar terms over the past year, part of a broad surge in virtual currencies that has fueled concerns of a bubble. The process is fast and easy with convenient and advanced trading platform (desktop and mobile), low spreads and instant execution. China seems pretty determined to keep Bitcoin from gaining any more traction.
"I would assume that if China shuts down trading on continuous order books of the large exchanges, the price would drop below $4,000, or the price of the United States dollar price of bitcoin would catch up to where it's trading equivalently in China, " he said.
The country's role in the bitcoin market had already started shrinking in recent months as the authorities tightened regulation. According to bitcoin market data provider Coin Dance, demand toward bitcoin in over-the-counter and peer-to-peer bitcoin markets such as LocalBitcoins has actually increased over the past two weeks.
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