The Chinese government has sent instructions to the country’s bitcoin and virtual currency exchanges that they must shut down by September 15.
The move comes after China banned Initial Coin Offerings (ICOs) on September 4, on the basis that unregulated ICO sales violated Chinese law.
Reuters quoted Li Lihui, a senior official at the National Internet Finance Association of China and a former president of the Bank of China, speaking at a conference in Shanghai, on what may be the government’s apparent rationale behind banning bitcoin whole-sale.
Lihui said, “Digital tokens like bitcoin, ethereum that are stateless, do not have sovereign endorsement, a qualified issuing body or a country’s trust, are not legal currencies and should not be spoken of as digital currencies. They can become a tool for illegal fund flows and investment deals.”
Major Chinese exchange BTCC (which started doing business in the U.S. in November 2016) has announced that users will be able to withdraw their funds after the exchange shuts down on September 30, but in a Tweet encouraged users to “withdraw their funds as quickly as possible.” In another Tweet, however, the exchange said that users could withdraw money whenever they wished. The eventual fate of the assets that the exchanges currently hold is unknown at this time. There has been speculation that peer-to-peer trades would continue, or that exchanges could move their operations overseas. Quartz reported that OKCoin’s statement on the shutdowns noted that “Bitcoin and peer-to-peer trades are not illegal.”
Coindesk has obtained a leaked document that outlines the government’s specific directives to the bitcoin exchanges as they wind down their operations. Those can be seen here.