Major exchanges in China are actively seeking avenues outside the country in a bid to escape the Peoples Bank of China’s (PBOC) tightening grip on Bitcoin.
Huobi CEO Leon Li told the South China Morning Post:
“We have two paths of action [to protect] our platform…”We are trying to create an offshore account and to go international. We don’t want to touch the customer’s money in China, because maybe [regulation] is going to get worse.”
Last month, Huobi and several other exchanges were informed by their partner banks of the discontinuation of their services. By the same token, banks stopped processing transactions made by customers to Bitcoin exchanges.
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Bobby Lee, CEO of BTC China, said his exchange is increasingly relying on paper vouchers to avoid transacting through the banks. He believes that the recent crackdown has severely lessened the appeal of Bitcoin in China, saying, “Newcomers who have heard about bitcoin who were planning to come and buy bitcoin out of curiosity, as an investment or for novelty’s sake are now thinking twice.”
More Cat & Mouse?
Even if Huobi et al are successful in going offshore, there’s no guarantee Chinese Bitcoiners will be able to get their money there. Currently, Chinese sending money out of the country are limited to $50,000 worth annually. This, theoretically, should not pose a problem for most Bitcoiners.
It has been debated though how far the PBOC is willing to go to tame Bitcoin. It seems unlikely that they’ll revamp their capital control policies just to target what constitutes but a minuscule fraction of capital that would flow out of the country. There is nothing stopping them, however, from imposing directives targeted specifically toward those looking to deal in Bitcoin via offshore banks. Such directives, fulfilled via local banks, would be the next step in the game of cat and mouse between the PBOC and Bitcoin.
Alternatively, we can’t rule out the potential role of UnionPay. It has become a popular tool for funneling yuan out of China, particularly in Macau where fake transactions, sometimes on the scale of millions of yuan, are carried out with merchants to secure yuan cash for gambling. One wonders how far exchanges will go in a world where they’re conducting business offshore.