Skirting the Great Wall: The Chequered Saga of Crypto in China, 2013-2017

2013: Restrictions on financial institutions' Bitcoin dealings, stark warnings about financial stability threats, but a hands-off approach to crypto tradingIn a Dec. 3 circular, the Chinese government defined Bitcoin as a virtual commodity, declaring that it was not recognized as legal tender.

2013's so-called 'Notice on Precautions Against the Risks of Bitcoin' was signed by five official entities, the People's Bank of China, the Banking Regulatory Commission, the Ministry of Industry and Information Technology, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission.

The notice stipulated that financial and payment insitutitions were prohibited from dealings in Bitcoin, including banks, and that crypto exchanges should register with the government's Telecommunications Regulatory Agency and comply with anti-money laundering and know-your-customer measures.

The day before the bank's action, Jan. 5, the global Bitcoin market had taken a steep 21 percent price plummet, with Bitcoin tumbling from over $1190 to $938. The South China Morning Post reported that - in the midst of the coin's vertiginous decline - Chinese investors were experiencing system failures on major exchanges such as BTCC and OKCoin.

Bobby Lee, CEO of the popular Shanghai-headquartered BTCC exchange, tweeted on Jan. 6:."BTCC regularly meets with the People's Bank of China and we work closely with them to ensure that we are operating in accordance with the laws and regulations of China.

The press release put forth from the PBOC today outlines that there is significant volatility in Bitcoin trading, and also quoted from a notice released in 2013 saying that Bitcoin is a virtual good and doesn't have legal tender status.

Several crypto analysts had gone so far as predict an eventual "quasi-synchronization" between the yuan's declining fortunes and Bitcoin's ascent, noting that Chinese investors were increasingly using the cryptocurrency as a vehicle for conveying value into more stable foreign currencies - and also as an instrument for speculative trading.

The trend significantly raised the stakes for Chinese crypto traders; director of the Finance and Securities Research Institution at Wuhan University of Science and Technology, Dong Dengxin, observed that "the policy risks of Bitcoin trading in China are higher" because of the country's capital controls.

Of the larger exchanges, OKCoin and Huobi issued statements on Feb. 9 they would be halting Bitcoin withdrawals completely, with BTCC reviewing the matter and subsequently announcing on Feb. 15 it would be suspending crypto withdrawals until March 15.The withdrawal freeze on all three platforms eventually lasted until early June, and had an almost immediately-felt impact on the Bitcoin market.

OKCoin announced on Sept. 15 it would cease all trading on Sept. 30.Also on Sept. 15, ViaBTC said it would deactivate the ViaBTC official website for mainland China Sept. 30 and return any holdings of renminbi or Bitcoins to clients before then.