Regulatory storm! The central bank met with the three major Bitcoin exchanges and the State Administration of Foreign Exchange investigated multiple Bitcoin trading platforms

According to The Paper, on Friday (January 6), the People's Bank of China and its Shanghai headquarters held talks with three Bitcoin exchanges - Huobi, Bihang and Bitcoin China - in Beijing and Shanghai respectively, asking them to conduct self-inspections and carry out corresponding rectifications for recent abnormal situations. People from Bitcoin exchanges who participated in the talks said that they would actively cooperate with the central bank in self-inspections and establish an industry alliance to enhance self-discipline.

In addition, Tencent Finance learned from people close to the regulator that the State Administration of Foreign Exchange also investigated several major domestic Bitcoin trading platforms on January 6, perhaps to investigate recent behaviors such as transferring assets through Bitcoin to circumvent foreign exchange controls.

This Friday (January 6), the Shanghai headquarters of the People's Bank of China announced that the bank, together with the Shanghai Financial Office and relevant regulatory departments, met with the main person in charge of the Shanghai Bitcoin Trading Platform and emphasized that Bitcoin is a specific virtual commodity and cannot be used as currency. After the news was announced, the price of Bitcoin plunged by more than 10%.

The announcement stated that the price of Bitcoin has fluctuated abnormally recently. In order to prevent risks and maintain financial stability, the Shanghai headquarters of the People's Bank of China and the Shanghai Financial Office, together with relevant regulatory authorities, recently met with the main person in charge of the Bitcoin trading platform "Bitcoin China" to understand the operation of the platform, remind them of possible risks, and require them to strictly comply with relevant laws and regulations and operate in compliance with the law. The platform was urged to conduct self-inspection in accordance with relevant laws and regulations and carry out corresponding rectification.

The announcement also stated that according to the Notice on Preventing Bitcoin Risks issued by the People's Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission (Yinfa [2013] No. 289), Bitcoin is a specific virtual commodity that does not have monetary attributes such as legal compensation and compulsion, does not have the same legal status as currency, and cannot and should not be used as currency in the market. Institutional and individual investors should have a correct view of virtual commodities and virtual currencies, invest rationally, bear their own risks, safeguard their own property security, and establish correct monetary concepts and investment ideas.

After the central bank released the above data at around 7 p.m., data from Bitcoin China showed that the price of Bitcoin plunged rapidly, from around 6,600 yuan to 6,200 yuan per unit. After a brief consolidation, it fell below the 5,800 mark. After the news came out, the total decline exceeded 10%, widening the full-day decline to 17%:

"Bitcoin China" is one of the three largest Bitcoin trading platforms in China ( Bitcoin China , Huobi, OKcoin). Data from these three exchanges show that China's Bitcoin trading volume accounted for 93% of the global trading volume in 2016.

However, many media reports previously claimed that such a large trading volume was inflated by domestic exchanges themselves. The Paper quoted industry insiders as saying that “inflating volume” is quite common in domestic exchanges, and the main purpose is twofold: one is to “use beautiful data to attract investors”, and the other is to make people who invest in Bitcoin regard it as a reliable platform, playing the role of “data endorsement”.

A senior Bitcoin investor told The Paper that the trading volume on each platform is very high now for several reasons. "First, the current surge in Bitcoin prices will definitely attract some new investors. Investors will definitely open accounts on platforms with large trading volumes, and after opening an account, they will deposit funds, so the platform will play a financing role. Second, it also plays a certain role in speculation. The platform will definitely make money from withdrawal fees. If the speculation is good, a large number of people will buy and sell on it, and they can earn a lot of withdrawal fees. Third, the increase in trading volume will also push up prices, attracting more people to join the game. Fourth, there is competition between platforms."

In 2016, the increase of Bitcoin exceeded 200%, which not only surpassed any currency pair in the foreign exchange market, but also surpassed star commodities such as real estate and black metals. As of Thursday this week, the price of 1 Bitcoin (US$1,250) has officially exceeded the price of 1 ounce of gold (US$1,170) at an exchange rate of 6.93.

It is worth noting that on January 5, after Bitcoin broke through its all-time high, the price of Bitcoin on some domestic exchanges experienced a flash crash. According to the market data of Huobi.com and OKCoin, two well-known domestic trading platforms, the highest price of Bitcoin during the trading session was close to RMB 9,000, and then it quickly plunged to around RMB 6,000, a drop of more than 25%.

Some analysts said that the rise of Bitcoin was mainly due to capital and currency restrictions in countries such as China, India and Venezuela, which prompted people to buy electronic currencies to preserve their savings and also prompted investors to continue buying. In the past year, Bitcoin, as an investment asset, has beaten all other currencies, stock indices and commodity contracts.

However, some analysts believe that the current price of Bitcoin is more driven by speculative forces in the Chinese market, as China's trading volume accounts for more than 90% of the world's total.

In 2013, the price of Bitcoin once exceeded $1,100, even more expensive than gold. However, with the theft of the largest Bitcoin exchange and increasing regulatory pressure, Bitcoin once fell by more than 80%.