Bitcoin in China still chugging along, a year after clampdown

A year after China began tightening regulations around Bitcoin, the virtual currency is still thriving in the country, albeit on the fringes, according to its largest exchange.

Bitcoin prices may have declined, but Chinese buyers are still trading the currency in high volumes with the help of BTC China, an exchange that witnessed the boom days back in 2013, only to see the bust following the Chinese governments announcement, in December of that year, that banks would be banned from trading in bitcoin.

This eventually led to a clampdown that scared customers away from the currency, and threw a wrench in the business of local exchanges, including BTC China.

Although financial institutions are banned from dealing in bitcoins, the virtual currency is still legal, and can be traded by individuals willing to take on risk, according to the government. Thats given BTC China enough room to operate, deploying a network of people reselling special vouchers that can be exchanged for bitcoins.

The practice has helped BTC China not only stay afloat, but become the exchange with the largest trading volume, according to bitcoincharts.com.

That doesnt mean bitcoin is gaining steam as a currency used to buy goods. Since the government clampdown, the Chinese bitcoin market has matured into one thats focused on speculative trading, said Bobby Lee, CEO of BTC China.

So its very much about people coming to use the platform as a trading vehicle to make money, he added.

About 65 percent of all bitcoin trades are made with the Chinese yuan, according to bitcoincharts.com. Some of these deals involve arbitrage bots, or software thats designed to make a profit from price differences among the different exchanges.

Theres a huge contingent out from Russia that will buy on BTC, and that will cause the price of bitcoin to go up, Lee added.

To expand its business, BTC China has launched a bitcoin mining pool, so that multiple buyers can work together to mine the virtual currency, and share the profit. But attempting to bring bitcoin to a wider audience in China isnt expected to be easy.

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Bitcoin in China still chugging along, a year after clampdown