As reported by Reuters, a long-lasting withdrawal freeze in China’s bitcoin exchange ecosystem is finally being lifted.
On June 1st, Bitcoin prices rose to USD $2400 on news that three major Chinese exchanges (BTCChina, Huobi and OKCoin) were going to allow customers to withdraw Bitcoin after all, reversing a decision the exchanges had made just three months ago. This comes on the heels of several back-and-forth decisions on the matter, with each decision causing fluctuations in the global value of the currency.
Bitcoin withdrawals from leading Chinese exchanges are now allowed, albeit contingent on passing a verification requirement and also subject to daily (10 Bitcoin) and annual (USD $1 million) withdrawal limits.
Capital outflow controls
The People’s Bank of China (PBOC) is seeking to crack down on Bitcoin trades in connection with possible legal violations related to money laundering and foreign exchange management. Specifically, the PBOC has expressed concern that Bitcoin could facilitate capital flight in the Chinese economy — a Chinese investor can buy Bitcoins on Chinese exchanges and then sell them on exchanges outside of China, thereby circumventing official limits on conversion between Chinese renminbi (RMB) and other foreign currencies.
Although Bitcoin withdrawals account for only a small portion of total capital outflows from China, Chinese Bitcoin trading has accounted for approximately 98% of total global Bitcoin trading over the past six months.
One reason the PBOC may be less concerned about Bitcoin is that the RMB has bucked forecasts that it would continue to fall (after losing about 6.5 percent against the United States dollar (USD) last year), instead gaining more than 2 percent against the USD so far this year.