China's Top Bitcoin Exchanges Extend Suspension of Withdrawals

(Bloomberg) -- China's three largest bitcoin exchanges have extended a self-imposed moratorium on all coin withdrawals for an indefinite period, as they seek regulatory approval for a crypto-currency that's gained popularity with local investors as an alternative to the yuan.

BTC China, Huobi and OKCoin said in separate statements Wednesday that the suspension will lift only after regulators approve internal compliance upgrades. The three temporarily halted withdrawals last month, citing central bank requirements to re-tool such systems. Huobi and OKCoin have said it will take about a month to adjust to the new guidelines. BTC China didn't give a time.

Bitcoin prices were down 2.6 percent at 5:58 p.m. local time, paring a loss of as much as 6 percent earlier. The price recovery began soon after the exchanges made their announcements around 4 p.m.

The digital currency, which last week passed the price of an ounce of gold for the first time, has come under increased scrutiny by Chinese authorities worried about money laundering and capital flight. Wednesday's move suggests Chinese authorities' are sticking to their hard-line stance on the cryptocurrency. People's Bank of China official Zhou Xuedong told Bloomberg News on Tuesday that bitcoin regulation introduced previously wasn't temporary.

China has taken a central role in the bitcoin market in recent years as its citizens became leading traders and miners, deploying the vast computing power needed to make transactions with the cryptocurrency possible. Their interest was fueled by a hunt for alternative assets, zero exchange fees and the low cost of electricity to run mining computers. Demand from investors in Asia's largest economy, home to most of the world's bitcoin trades, has fueled a three-fold increase against the dollar over the past year.

But the authorities are concerned, among other things, that bitcoin's being used to spirit money out of the country, undermining official efforts to clamp down on capital outflows and prop up the yuan. The PBOC told nine bitcoin exchanges during a meeting in Beijing last month that it will close exchanges that violate rules on foreign exchange management, money laundering, payments and settlement. 

To contact Bloomberg News staff for this story: Gary Gao in Shanghai at cgao58@bloomberg.net, Benjamin Robertson in Hong Kong at brobertson29@bloomberg.net.

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Edwin Chan, Allen Wan

With assistance from Gary Gao, Benjamin Robertson