Registration, trading, and cash exchange for Bitcoin are completely stopped.

After seven ministries and commissions jointly launched a strong crackdown and clearly defined ICO as "suspected of illegal issuance of tokens and tickets, illegal issuance of securities, illegal fundraising, financial fraud, pyramid schemes and other illegal and criminal activities", the ban on token issuance and financing has spread to Bitcoin.

Recently, Bitcoin China, Huobi, and OKcoin have successively announced that they will stop all transactions on their digital asset trading platforms. The actions of the three major Bitcoin trading platforms also mean that the on-site trading of Bitcoin in China has been completely blocked.

Bitcoin in trouble

Bitcoin has attracted much attention since its birth in 2009, and has soared from $0.003 in 2010 to more than $3,000 today, a million-fold increase in seven years. Such explosive growth has attracted speculators who want to use it to get rich, and the joke of "one coin, one villa" has also spread in the cryptocurrency circle.

Rational investors are optimistic about Bitcoin's decentralization, anonymity, and difficulty in tracing, and even believe that it can be used as a means of settlement. However, any computer connected to the Internet can perform peer-to-peer Bitcoin transfers. The flow of funds only relies on the Internet and does not need to go through third-party institutions such as banks. This has also made Bitcoin a money laundering channel for some criminals.

Although the central bank did not explicitly mention Bitcoin and Ethereum when it banned digital currency financing and trading platforms from exchanging legal tender for digital currency, it is undeniable that Bitcoin played a significant role in raising $1.6 billion through ICOs in the past year. Bitcoin, ICO projects, and other digital tokens all pushed each other forward. The popularity of ICOs drove up the price of Bitcoin, and the rise in the price of Bitcoin made investors rush to ICOs. When the lie of getting rich quickly through ICOs was exposed, the bubble of Bitcoin burst.

The first to express its position was Bitcoin China. On September 14, Bitcoin China issued an announcement stating that it would shut down all transactions on September 30. Bitcoin China's mining pool (Guochi) would not be affected and would continue to operate normally.

"Huobi.com will stop all virtual currency trading business this time. We have stopped user registration. According to the trading business schedule, we will notify all users before September 30 that trading will be stopped. Before October 31, we will gradually stop all digital asset exchange for RMB business." A person related to Huobi.com told the reporter of IT Times that Huobi.com only stopped RMB trading business at first, and other businesses were not affected. However, the situation changes every day. One day later, Huobi.com announced that it would stop all virtual currency trading business. OKCoin also revised its announcement and stopped all virtual currency trading business.

Since the regulatory authorities have not declared Bitcoin and digital assets illegal, the platform still hopes to provide users with compliant digital asset services. A staff member of a Bitcoin trading platform told reporters that the executives are discussing how the platform should proceed. According to insiders, the heads and executives of various Bitcoin trading platforms are currently required to cooperate with the investigation in Beijing. According to regulatory requirements, the shareholders, actual controllers, executives, and financial managers of each trading platform must fully cooperate with relevant work during the liquidation period.

Expert: Bitcoin is a utopia in high-tech disguise

"Bitcoin is actually the 'utopia' of the 21st century, and it is the first 'utopia' equipped with high-tech wings. Bitcoin is intended to replace legal tender transactions, and currently no government is willing to give up its management rights and accept Bitcoin to replace legal tender." Liu Shengjun, director of the China Financial Reform Research Institute, told the IT Times reporter that the central bank has long defined Bitcoin as a virtual commodity, but Bitcoin seems to be unable to find its own positioning and wants to act as a digital currency.

Liu Shengjun further explained that Bitcoin cannot become a currency, and its two important characteristics also happen to limit it. First, the limited issuance of Bitcoin is 21 million pieces, and the total amount is fixed and scarce, which is very similar to the properties of gold, which has long withdrawn from the stage of currency; second, Bitcoin is decentralized, based on a specific algorithm, generated through a large number of calculations, and a distributed database composed of many nodes to confirm and record all transactions, without the need for central bank supervision. It is precisely because of this that Bitcoin transactions provide encryption protection for illegal activities and even become an important cornerstone of dark web transactions. Criminals use Bitcoin to trade drugs and contraband on the dark web, thereby circumventing supervision.

Professor Ying Zhanyu of the School of Finance at the Central University of Finance and Economics also believes that the "decentralized" nature of Bitcoin means that the state will give up its existing power and let the market correct itself. It seems that the conditions are not yet mature. The emergence of Bitcoin is a technical means, which has gradually evolved into the financialization of technology. In the process of ICO financing, Bitcoin has changed the transaction chain as an intermediary. If it is allowed to develop, it is likely to induce a series of social events.

China is an important participant in the Bitcoin value chain. China's Bitcoin trading volume once accounted for 90% of the world's total. Even when the central bank interviewed and inspected several domestic virtual currency trading platforms at the beginning of the year, China's Bitcoin trading volume ranked among the top three in the world.

When the three major trading platforms are "annihilated", what should investors do? Liu Shengjun believes that private transactions of Bitcoin will still be allowed in China, which means that liquidity will be greatly reduced, and it will become very difficult for ordinary people to participate in Bitcoin. Ying Zhanyu said that over-the-counter transactions are personal behaviors between investors, and investors should bear their own risks while taking risks. An investor in the currency circle told the reporter of IT Times that over-the-counter transactions also have risks. Affected by this turmoil, some Bitcoin holders were anxious to sell their coins but encountered scammers. The Bitcoin was transferred out, but the buyer's money did not arrive, so they only dared to trade with acquaintances.

The regulatory intervention in Bitcoin seems to be stricter than expected. According to the Wall Street Journal, regulators have decided to completely ban Bitcoin trading channels in China. Not only is it limited to closing Bitcoin exchanges, but the broader regulatory measures may also include prohibiting mainland China from accessing external Bitcoin exchange websites, such as Coinbase in the United States and Bitfinex in Hong Kong, China.