china_bitcoin

How China's Stifling Bitcoin and Cryptocurrencies: QuickTake

China Said to Curb Power Supply for Bitcoin Miners

China, home to the world’s biggest community of Bitcoin miners, is cracking down on cryptocurrency activity. From a halt to virtual currency trading on domestic exchanges to banning initial coin offerings, regulators have taken a proactive role in shaping the stratospheric rise of Bitcoin and its peers. The country’s moves come as President Xi Jinping targets financial risk in the economy following a decade of booms and busts in everything from stocks to real estate. The result: China’s once-dominant role in the world of cryptocurrencies is shrinking.

1. What exactly is China doing?

First it banned initial coin offerings, or ICOs -- the equivalent of initial public offerings for new virtual currencies. Then it called on local exchanges to stop trading in cryptocurrencies and outlined proposals to discourage bitcoin mining -- the energy-intensive computing process that makes transactions with the digital currency possible. It’s also moved to stop Chinese companies listed abroad skirting its domestic ban on ICOs. Officials now intend to block domestic access to online platforms and mobile apps that offer exchange-like services for cryptocurrencies. They’re also targeting platforms that allow investors to trade digital assets on overseas exchanges. Domestic stock exchanges, meanwhile, are scrutinizing companies that promote themselves as blockchain-related to boost their shares. It’s part of a concerted effort by agencies including the central bank, the cyberspace administration and China’s Ministry of Industry and Information Technology.

2. Is Bitcoin trading allowed in China?

Bitcoin and its peers can still be traded, but only in over-the-counter markets, a slower process that some analysts say increases credit risk.

3. Why is China cracking down?

There’s been no explicit explanation, but cleansing risk from financial markets has been a government mantra for more than two years. Among the main concerns is the booming shadow banking sector, a potential source of unregulated loans to speculators in whatever the latest craze happens to be. Digital currencies also provide a way to move money out of China, potentially adding to outflows that officials have aggressively set about stemming. Mark McFarland, chief economist at Union Bancaire Privee SA HK, said the clampdown moves “suggest a longer term process of tightening scrutiny of activities that aren’t in the normal sort of monetary realm.”

No longer welcome?

4. Is China anti-cryptocurrency?

Hardly. The People’s Bank of China has run trials of its own prototype cryptocurrency, taking it a step closer to being the first major central bank to issue digital money. China’s vision, however, seems to be based more on taking full control of such transactions in contrast to the libertarian aspirations of Bitcoin.

5. What’s the impact of China’s actions?

The moves are reshaping the Bitcoin mining industry and driving up costs. Miners initially flocked to China because of its inexpensive power, local chipmaking factories and cheap labor -- now they may have to look elsewhere. Bitmain, which runs China’s two largest Bitcoin-mining collectives, is setting up regional headquarters in Singapore and now has mining operations in the U.S. and Canada. BTC.Top, the No. 3 mining pool, is also opening a facility in Canada. Bitcoin exchanges and wallet services in the country are also leaving, setting up over-the-counter shops in Hong Kong or looking at operating out of Singapore or South Korea.

6. What about cryptocurrency prices?

At first prices seemed to shrug off news of increased Chinese regulation. But analysts say the rising tide of regulation has weighed on digital currencies, helping to explain heavy losses at the start of 2018.

China's Bitcoin Exchanges Receive Shutdown Orders and Closure Timeline

China's bitcoin and cryptocurrency exchanges have received instruction that they will need to voluntarily shut down by September 15.

According to both leaked documents and statements from local exchange executives, issued on condition of anonymity, China's regulators have now issued verbal directives indicating how they expect the businesses to wind down operations due to the fact that they are operating domestically without a formal license.

A document leaked on Chinese social media, translated below, lists a series of steps the exchanges must undergo during that closure. While not received directly by exchange executives surveyed, the document is reportedly consistent with verbal guidance.

Issued by the office of the Leading Group of Beijing Internet Financial Risks Remediation, the document outlines how exchanges will need to coordinate with local regulators following their announcements, listing how they should handle customer data and banking relationships.

Already, however, two exchanges – BTCC and ViaBTC – have announced their closure, both citing the regulatory statement issued by authorities on September 5.

BTCC, in the wake of the announcement, posted a series of tweets about user withdrawals, stating that they will be able to get their money out even after the September 30 closure date. In one of those tweets, the exchange suggested that users "withdraw their funds as quickly as possible."

While not all China-based exchanges have formally indicated that they will shut down, one exchange executive indicated that more announcements will be forthcoming in light of the order. Exchanges Huobi and OKCoin are said to have met with regulators today, and are expected to announce plans to shut down within hours.

Representatives from Huobi and OKCoin did not respond to requests for comment at press time.

The full translated document reads:

1. Before 20 September 6pm, exchanges shall come up with a detailed risk-free clearing plan, and send this plan to the office. Exchanges shall deal with their claims and liabilities properly, and insure that investors' funds and virtual currencies are safe.

2. Before 20 September 6pm, exchanges shall determine a bank account, which will be used for depositing user funds. All other accounts in banks and other non-bank payment service providers shall be canceled and reported to the Business Management Department of People's Bank of China.

3. Before 15 September midnight, exchanges shall publish closing announcements, and announce a schedule to stop the trading of all virtual currencies. New user registration shall be stopped immediately after the announcement.

4. Shareholders, controllers, executives, and core financial and technical staff of exchanges shall cooperate fully with authorities during the clearing, while staying in Beijing.

5. Exchanges shall report their developments daily to local authorities before the clearing is completed.

6. Exchanges shall save all user trading and holding data, and send it to local authorities immediately in DVDs.

The document is signed: The office of the Leading Group of Beijing Internet Financial Risks Remediation, Sept. 15, 2017

All times listed are Beijing local time.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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China Bitcoin Exchange to Stop Trading Virtual Currencies Amid Crackdown

BEIJING — A major Chinese exchange specializing in the trading of Bitcoin announced on Thursday that it would stop trading by the end of the month, amid a broader crackdown against virtual currencies by the authorities in Beijing.

The announcement by BTC China, the country’s first and largest digital currency exchange, came days after the Chinese authorities banned fund-raising for new digital currencies, and amid worries that regulators would tighten rules surrounding currencies like Bitcoin.

The exchange’s decision is the first of its kind in China, and it raises the specter of other exchanges shutting down Bitcoin trading in the future.

China has sought to walk a tightrope when it comes to Bitcoin and similar virtual currencies. Whereas the currencies provide the country with a chance to develop new and emerging technologies, officials also worry that they would allow Chinese consumers to get around tough restrictions on how much money they can send overseas and allow them to be used to launder money.

Still, the impending closing of BTC China’s online currency trading operations is a blow to the country’s aspirations to lead the way in the sector. Some two-thirds of all Bitcoin issued daily is “mined” in China, and an array of other companies benefit from such efforts, including equipment suppliers and construction firms that build enormous Bitcoin farms.

“It’s a sad day for the Bitcoin community here in China,” said Wei-Tek Tsai, the director of the Digital Society and Blockchain Laboratory at Beijing’s Beihang University.

In a statement published on the messaging platform WeChat, BTC China said it would “stop all trading on September 30.” It said the move was in response to a decision this month by Chinese regulators to ban so-called initial coin offerings, in which new digital currencies seek to raise funds.

The price of Bitcoin dropped more than 10 percent on Thursday, to around $3,500, in the hours after the announcement.

Bitcoin is increasingly in the spotlight around the world. Its proponents — a group that includes tech enthusiasts, civil libertarians, hackers and criminals — cheer the fact that it can be sent across borders anonymously and that it is not regulated by a central authority like a typical currency.

China has emerged as the leading force in Bitcoin trading in recent years. But as the virtual currency’s profile has risen in the country, Chinese regulators have increasingly sought to control how it is traded and used. When they stepped up their oversight of Bitcoin trading this year, it led to a rapid and substantial drop in trading volumes.

“Because it is traded anonymously and peer to peer, Bitcoin makes it easy for money laundering and tax evasion,” said Sheng Songcheng, an adviser to the People’s Bank of China, the country’s central bank.

Official Chinese news media has cited officials as saying they want to close Bitcoin exchanges — a move that precipitated Thursday’s decision by BTC China — though they have not set a time frame.

China Business Network, a financial and business news portal, said on Thursday that the authorities in Shanghai, where BTC China is registered, would close all Bitcoin exchanges within their jurisdiction by the end of the month; and the report piled on further uncertainty.

Though the moves by the Chinese authorities this month have resulted in declines in the value of Bitcoin, some argue that they will allow for a more even geographic distribution in the online currency’s trading and mining.

“The overall share of Chinese exchanges has been diminishing steadily,” said Thomas Glucksmann, marketing manager for the Hong Kong-based Bitcoin exchange Gatecoin. Mr. Glucksmann said that much of the Bitcoin community had been concerned about the increased level of scrutiny in China and had been moving their assets out of the country.

“People will realize that China is out of the picture for the moment,” he said.

Amie Tsang contributed reporting from London.

China Is Said to Ban Bitcoin Exchanges While Allowing OTC

The Wild Swings in Cryptocurrency Investments

China plans to ban trading of bitcoin and other virtual currencies on domestic exchanges, dealing another blow to the $150 billion cryptocurrency market after the country outlawed initial coin offerings last week.

The ban will only apply to trading of cryptocurrencies on exchanges, according to people familiar with the matter, who asked not to be named because the information is private. Authorities don’t have plans to stop over-the-counter transactions, the people said. China’s central bank said it couldn’t immediately comment.

Bitcoin slumped on Friday after Caixin magazine reported China’s plans, capping the virtual currency’s biggest weekly retreat in nearly two months. The country accounts for about 23 percent of bitcoin trades and is also home to many of the world’s biggest bitcoin miners, who use vast amounts of computing power to confirm transactions in the digital currency.

“Trading volume would definitely shrink,” said Zhou Shuoji, Beijing-based founding partner at FBG Capital, which invests in cryptocurrencies. “Old users will definitely still trade, but the entry threshold for new users is now very high. This will definitely slow the development of cryptocurrencies in China.”

While Beijing’s motivation for the exchange ban is unclear, it comes amid a broad clampdown on financial risk in the run-up to a key Communist Party leadership reshuffle next month. Bitcoin has jumped about 600 percent in dollar terms over the past year, fueling concerns of a bubble. The People’s Bank of China has done trial runs of its own prototype cryptocurrency, taking it a step closer to being the first major central bank to issue digital money.

“There has been a general tightening of the screw on regulating financial and monetary conditions,” said Mark McFarland, chief economist at Union Bancaire Privee SA HK in Hong Kong. “All of these things suggest a longer term process of tightening scrutiny of activities that aren’t in the normal sort of monetary realm.”

OKCoin, BTC China and Huobi, the country’s three biggest bitcoin exchanges, said on Monday that they hadn’t received any regulatory notices concerning bans on cryptocurrency trading. All three venues reported transactions on Monday, with bitcoin rising 7.6 percent on OKCoin as of 5:09 p.m. local time.

While bitcoin users will still be able to trade cryptocurrencies in China without exchanges, the process is likely to be slower and come with increased credit risk, analysts said.

The exchange ban is unlikely to have a major impact on the prices of cryptocurrencies globally because venues outside China will continue trading, according to FBG Capital’s Zhou. The country’s role in the bitcoin market had already started shrinking in recent months as authorities tightened regulation. At one point, exchanges in China accounted for more than 90 percent of the world’s bitcoin transactions.

The bigger risk for global traders may be the massive rally in bitcoin prices, according to McFarland.

“Whenever you start to hear about Hong Kong taxi drivers becoming millionaires from buying bitcoin, you start to think this is not necessarily driven by fundamentals,” he said. “So you will get quite substantial pullbacks at some point.”

Watch more

— With assistance by Steven Yang, Gary Gao, Yinan Zhao, Yuji Nakamura, Justina Lee, and Eric Lam

How China Took Center Stage in Bitcoin’s Civil War

Mining for Bitcoin in China

View Slide Show ›

Gilles Sabrie for The New York Times

• June 29, 2016

A delegation of American executives flew to Beijing in April for a secret meeting just blocks from Tiananmen Square. They had come to court the new kingmakers in one of the strangest experiments in money the world has seen: the virtual currency known as Bitcoin.

Against long odds, and despite an abstruse structure, in which supercomputers “mine” the currency via mathematical formulas, Bitcoin has become a multibillion-dollar industry. It has attracted major investments from Silicon Valley and a significant following on Wall Street.

Yet Bitcoin, which is both a new kind of digital money and an unusual financial network, is having something of an identity crisis. Like so many technologies before it, the virtual currency is coming up against the inevitable push and pull between commercial growth and the purity of its original ambitions.

In its early conception, Bitcoin was to exist beyond the control of any single government or country. It would be based everywhere and nowhere.

Yet despite the talk of a borderless currency, a handful of Chinese companies have effectively assumed majority control of the Bitcoin network. They have done so through canny investments and vast farms of computer servers dispersed around the country. The American delegation flew to Beijing because that was where much of the Bitcoin power was concentrated.

At the time of the meeting, held at the Grand Hyatt hotel, over 70 percent of the transactions on the Bitcoin network were going through just four Chinese companies, known as Bitcoin mining pools — and most flowed through just two of those companies. That gives them what amounts to veto power over any changes to the Bitcoin software and technology.

China has become a market for Bitcoin unlike anything in the West, fueling huge investments in server farms as well as enormous speculative trading on Chinese Bitcoin exchanges. Chinese exchanges have accounted for 42 percent of all Bitcoin transactions this year, according to an analysis performed for The New York Times by Chainalysis. Just last week, the Chinese internet giant Baidu joined with three Chinese banks to invest in the American Bitcoin company Circle.

But China’s clout is raising worries about Bitcoin’s independence and decentralization, which was supposed to give the technology freedom from the sort of government crackdowns and interventions that are commonplace in the Chinese financial world.

“The concentration in a single jurisdiction does not bode well,” said Emin Gun Sirer, a professor at Cornell and a Bitcoin researcher. “We need to pay attention to these things if we want decentralization to be a meaningful thing.”

The power of Chinese companies has already come to play a major role in a civil war that has divided Bitcoin followers over the last year and led to the departure of one of the top developers of the virtual currency. The dispute has hinged on technical matters as well as on bigger questions of what Bitcoin should look like in 10 or 20 years.

Network Bottleneck

The American companies whose executives journeyed to the Grand Hyatt — including venture-capital-funded start-ups like Coinbase and Circle — are fighting to make Bitcoin bigger. They hope to expand the capacity of the Bitcoin network so that it can process more transactions and compete with the PayPals and Visas of the world.

The current size of the network goes back to the early days, when Bitcoin’s founder, Satoshi Nakamoto, limited the amount of data that could travel through the network, essentially capping it at about seven transactions a second. As Bitcoin has grown more popular, those limits have caused severe congestion and led to lengthy transaction delays.

The American delegation in China had a software proposal, known as Bitcoin Classic, that would change all that.

The Chinese companies, though, had the ultimate decision-making power over any changes in the software, and they did not agree with the American delegation. The Chinese had thrown in their lot with another group of longtime programmers who wanted to keep Bitcoin smaller, in part to keep it more secure. The Americans hoped to persuade the Chinese to switch sides.

In a hotel conference room, the American team of about a half-dozen people cycled through its PowerPoint slides, in English and Chinese, arguing for expansion of the network, most notably pointing to the long delays that have been plaguing the system as a result of the congestion. The Chinese representatives listened and conferred among themselves. The group took a break for a lunch of lamb and dumplings at a nearby mall.

“We kept coming back and saying, ‘For better or worse, you have this leadership in the industry, and everyone is looking to you to show some leadership,’” said Brian Armstrong, chief executive of Coinbase.

Ultimately, Mr. Armstrong said, “We were unable to convince them.”

Some Bitcoin advocates have complained that the Chinese companies have been motivated only by short-term profit, rather than the long-term success and ideals of the project. Bobby Lee, chief executive of the Bitcoin company BTCC, which is based in Shanghai, bristled at that — and at the notion that the Chinese companies represent any sort of united front. He attended the April meeting and pointed out that the Chinese companies had disagreed among themselves on how urgent it was to make changes to the Bitcoin software.

He said the American companies failed to understand the power dynamics in the room that day. “It was almost like imperialistic Westerners coming to China and telling us what to do,” Mr. Lee said in an interview last week. “There has been a history on this. The Chinese people have long memories.”

A Mining Powerhouse

The mysterious creator of Bitcoin, Satoshi Nakamoto, released the software in early 2009. It was designed to provide both a digital coin and a new way to move and hold money, much as email had made it possible to send messages without using a postal service.

From the beginning, the system was designed to be decentralized — operated by all the people who joined their computers to the Bitcoin network and helped process the transactions, much as Wikipedia entries are written and maintained by volunteers around the world.

The appeal of a group-run network was that there would be no single point of failure and no company that could shut things down if the police intervened. This was censorship-free money, Bitcoin followers liked to say. Decision-making power for the network resided with the people who joined it, in proportion to the computing power they provided.

The allure of new riches provided the incentive to join: Every 10 minutes, new Bitcoins would be released and given to one of the computers helping maintain the system. In the lingo of Bitcoin, these computers were said to be mining for currency. They also served as accountants for the network.

For the first few years, aside from its use as a payment method on the Silk Road, an online drug market that has since been shut down, Bitcoin failed to gain much traction. It burst into the world’s consciousness in 2013 when the price of the digital money began to spike, in no small part because Chinese investors began trading Bitcoins in large numbers.

Mr. Lee said the Chinese took quickly to Bitcoin for several reasons. For one thing, the Chinese government had strictly limited other potential investment avenues, giving citizens a hunger for new assets. Also, Mr. Lee said, the Chinese loved the volatile price of Bitcoin, which gave the fledgling currency network the feeling of online gambling, a very popular activity in China.

There has been widespread speculation that Chinese people have used Bitcoin to get money out of the country and evade capital controls, but Mr. Lee and other experts said the evidence suggests this is not a significant phenomenon.

“No Chinese person is pushing for Bitcoin because it’s libertarian or because it’s going to cause the downfall of governments,” said Mr. Lee, who moved to China after growing up in Africa and the United States and studying at Stanford. “This was an investment.”

The extent of the speculative activity in China in late 2013 pushed the price of a single Bitcoin above $1,000. That surge — and the accompanying media spotlight — led China’s government to intervene in December 2013 and cut off the flow of money between Chinese banks and Bitcoin exchanges, popping what appeared to be a Bitcoin bubble.

The frenzy, though, awakened interest in another aspect of the currency: Bitcoin mining.

Peter Ng, a former investment manager, is one of the many people in China who moved from trading Bitcoins to amassing computing power to mine them. First, he mined for himself. More recently he has created data centers across China where other people can pay to set up their own mining computers. He now has 28 such centers, all of them filled with endless racks of servers, tangled cords and fans cooling the machines.

Mr. Ng, 36, said he had become an expert in finding cheap energy, often in places where a coal plant or hydroelectric dam was built to support some industrial project that never happened. The Bitcoin mining machines in his facilities use about 38 megawatts of electricity, he said, enough to power a small city.

The people who put their machines in Mr. Ng’s data centers generally join mining pools, which smooth the financial returns of smaller players. A popular one, BTCC Pool, is run by Mr. Lee’s company. This month it attracted about 13 percent of the total computational power on the Bitcoin network. The most powerful pool in China — or anywhere in the world — is known as F2Pool, and it had 27 percent of the network’s computational power last month.

The Politics of Pools

Big pool operators have become the kingmakers of the Bitcoin world: Running the pools confers the right to vote on changes to Bitcoin’s software, and the bigger the pool, the more voting power. If members of a pool disagree, they can switch to another pool. But most miners choose a pool based on its payout structure, not its Bitcoin politics.

It was his role overseeing BTCC Pool that got Mr. Lee invited to the meeting with the American delegation in Beijing. The head of operations at F2Pool, Wang Chun, was also there.

Perhaps the most important player in the Chinese Bitcoin world is Jihan Wu, 30, a former investment analyst who founded what is often described in China as the world’s most valuable Bitcoin company. That company, Bitmain, began to build computers in 2013 using chips specially designed to do mining computations.

Bitmain, which has 250 employees, manufactures and sells Bitcoin mining computers. It also operates a pool that other miners can join, called Antpool, and keeps a significant number of mining machines for itself, which it maintains in Iceland and the United States, as well as in China. The machines that Bitmain retains for itself account for 10 percent of the computing power on the global Bitcoin network and are enough to produce new coins worth about $230,000 each day, at the exchange rate last week.

Mr. Wu and the other mining pool operators in China have often seemed somewhat surprised, and even unhappy, that their investments have given them decision-making power within the Bitcoin network. “Miners are the hardware guys. Why are you asking us about software?” is the line that Mr. Ng said he often hears from miners.

This attitude initially led most Chinese miners to align themselves with old-line Bitcoin coders, known as the core programmers, who have resisted changing the software. The miners wanted to take no risks with the money they were minting.

But lately, Mr. Wu has grown increasingly vocal in his belief that the network is going to have to expand, and soon, if it wants to keep its followers. He said in an email last week that if the core programmers did not increase the number of transactions going through the network by July, he would begin looking for alternatives to expand the network.

However the software debate goes, there are fears that China’s government could decide, at some point, to pressure miners in the country to use their influence to alter the rules of the Bitcoin network. The government’s intervention in 2013 suggests that Bitcoin is not too small to escape notice.

Mr. Wu dismissed that concern. He also said that as more Americans buy his Bitmain machines and take advantage of cheap power in places like Washington State, mining will naturally become more decentralized. Already, he said, 30 to 40 percent of new Bitmain machines are being shipped out of China.

For now, though, China remains dominant.

“The Chinese government normally expects its businesses to obtain a leading role in emerging industries,” he said. “China’s Bitcoin businesses have achieved that.”

David Kestenbaum and Paul Mozur contributed reporting.

Bitcoin enthusiasts have figured out a way to get around a China trading ban

WeChat launch in Myanmar. WeChat NEW YORK — Chinese regulators are moving forward to shut down bitcoin trading in the country, but one executive says traders have a way to work around a ban.

On Thursday, The Wall Street Journal's Steven Russolillo and Chuin-Wei Yap reported that bitcoin traders can still exchange their coins via messaging apps such as WeChat, the largest in China with over 900 million users.

"You use WeChat, you meet someone, you chat, you buy and sell, you transfer money, nobody knows why you transferred the money," Leon Liu, chief executive and cofounder of BitKan said at a bitcoin conference in Beijing on Wednesday, according to The Journal. "This is everywhere now."

The Journal reported Monday that Chinese regulators would widen their crackdown on the digital coin. Authorities, according to reporting by Chao Deng, plan to shut down all channels for exchanging the cryptocurrency — not just commercial ones as originally expected. Many exchanges in the country have already halted trading or announced their intention to do so in the near future.

It's uncertain, however, how long bitcoin investors in China will be able to use WeChat as a go-around to the crackdown.

Recently, Beijing has taken a number of steps to increase its surveillance of apps like WeChat. On September 7, authorities said creators of messaging groups on the app will be liable for the behavior of members, according to Bloomberg.

"Already, 40 people from one WeChat group have been disciplined for spreading petition letters while arresting a man who complained about police raids, according to reports in official Chinese media," wrote Bloomberg's Lulu Yilun Chen.

Still, traders can simply flock to other messaging apps, including ones banned in the country.

"While Telegram is officially blocked in China, users can access the service through virtual private networks," Bloomberg says. "As a foreign encrypted platform, it is somewhat beyond the grasp of the country's authorities."

This Is How China Is Stifling Bitcoin and Cryptocurrencies

China, home to the world’s biggest community of Bitcoin miners, is cracking down on cryptocurrency activity. From a halt to virtual currency trading on domestic exchanges to banning initial coin offerings, regulators have taken a proactive role in shaping the stratospheric rise of Bitcoin and its peers. The country’s moves come as President Xi Jinping targets financial risk in the economy following a decade of booms and busts in everything from stocks to real estate. The result: China’s once-dominant role in the world of cryptocurrencies is shrinking.

1. What exactly is China doing?

First it banned initial coin offerings, or ICOs — the equivalent of initial public offerings for new virtual currencies. Then it called on local exchanges to stop trading in cryptocurrencies and outlined proposals to discourage bitcoin mining — the energy-intensive computing process that makes transactions with the digital currency possible. It’s also moved to stop Chinese companies listed abroad skirting its domestic ban on ICOs. (New York-listed Renren Inc. was said to cancel a planned overseas ICO). Officials now intend to block domestic access to online platforms and mobile apps that offer exchange-like services for cryptocurrencies. Domestic stock exchanges, too, are targeteing companies that promote themselves as blockchain-related to boost their shares. It’s part of a concerted effort by agencies including the central bank, the cyberspace administration and China’s Ministry of Industry and Information Technology.

2. Is Bitcoin trading allowed in China?

Bitcoin and its peers can still be traded, but only in over-the-counter markets, a slower process that some analysts say increases credit risk.

3. Why is China cracking down?

There’s been no explicit explanation, but cleansing risk from financial markets has been a government mantra for more than two years. Among the main concerns is the booming shadow banking sector, a potential source of unregulated loans to speculators in whatever the latest craze happens to be. Digital currencies also provide a way to move money out of China, potentially adding to outflows that officials have aggressively set about stemming. Mark McFarland, chief economist at Union Bancaire Privee SA HK, said the clampdown moves “suggest a longer term process of tightening scrutiny of activities that aren’t in the normal sort of monetary realm.”

4. Is China anti-cryptocurrency?

Hardly. The People’s Bank of China has run trials of its own prototype cryptocurrency, taking it a step closer to being the first major central bank to issue digital money. China’s vision, however, seems to be based more on taking full control of such transactions in contrast to the libertarian aspirations of Bitcoin.

5. What’s the impact of China’s actions?

The moves are reshaping the Bitcoin mining industry and driving up costs. Miners initially flocked to China because of its inexpensive power, local chipmaking factories and cheap labor — now they may have to look elsewhere. Bitmain, which runs China’s two largest Bitcoin-mining collectives, is setting up regional headquarters in Singapore and now has mining operations in the U.S. and Canada. BTC.Top, the No. 3 mining pool, is also opening a facility in Canada. Bitcoin exchanges and wallet services in the country are also leaving, setting up over-the-counter shops in Hong Kong or looking at operating out of Singapore or South Korea.

6. What about cryptocurrency prices?

At first prices seemed to shrug off news of increased Chinese regulation. But analysts say the rising tide of regulation has weighed on digital currencies, helping to explain heavy losses at the start of 2018.

China's Crackdown on Digital Currency: What It Means for Bitcoin

It’s been another rollercoaster ride for bitcoin. After breaking the $5,000 mark this weekend, the digital currency has dropped around 15%—in large part because China brought a screeching halt to the novel form of fund-raising known as “initial coin offerings.”

According to one expert, China’s ban on these ICOs—which have allowed companies to raise over $1 billion this year by selling digital “tokens”—will have both short and long term effects for bitcoin and other digital currencies.

“Chinese investors have played a crucial role in the growth of the ICO market and the recent rise in valuations,” says Robert Crea, an attorney with the law firm K&L Gates, who specializes in regulatory issues surrounding digital currencies. “The Chinese ban may impact liquidity in the ICO market by limiting the number of investors in the marketplace and the number of cryptocurrency exchanges. If Chinese investors are restricted from participating, markets could experience diminished liquidity, heightened volatility, and downward price pressure.”

China’s crackdown on ICOs follows similar moves by the United States, Canada, and Singapore in recent weeks, but appears to have had a larger impact on the market.

The ICO phenomenon began last year as startups realized they could raise large amounts of capital without the legal or regulatory constraints that go with traditional venture funding. In conducting “token” sales, the startups claimed the tokens provided a way for buyers to access new software programs they were building. But as the tokens can also be sold on digital currency exchanges, the ICOs in many cases resembled the sale of unlicensed securities.

This explains—in part—China’s actions, as reported by Bloomberg on Monday:

The People’s Bank of China said on its website Monday that it had completed investigations into ICOs, and will strictly punish offerings in the future while penalizing legal violations in ones already completed. The regulator said that those who have already raised money must provide refunds.

The effect of China’s decision on the market is twofold. First, it chills the overall appeal of digital currency as a speculative investment. Secondly, it undercuts demand for the two most popular digital currencies, bitcoin and Ethereum, which are typically used to buy the tokens for sale in an ICO.

Since the weekend, the price of Ethereum has fallen even more sharply than bitcoin, dropping from a high of nearly $400 to around $298 as of Tuesday morning, according to data from Coindesk. Bitcoin was trading just under $4,400.

While China’s ICO decision caused prices to fall, the crackdown may not be permanent: One analyst told Bloomberg the government may in the future allow ICOs to resume on approved platforms or even vet them on an individual basis.

This is part of Fortune’s new initiative, The Ledger, a trusted news source at the intersection of tech and finance. For more on The Ledger, click here.

China’s three largest bitcoin exchanges will all stop offering local trading

Well, that didn’t take long. Yesterday, China’s longest running bitcoin exchange, BTC China, announced it will suspend its local trading service at the end of this month, and today the country’s two other major exchanges — Huobi and OKCoin — followed suit to say they will cease at the end of October.

The writing was on the wall when The Wall Street Journal reported on Monday that the Chinese government intended to shut down bitcoin exchanges after banning ICOs the previous week. Government officials then began meeting with exchanges this week to bring about the trading suspensions, a source with knowledge of discussions told TechCrunch.

While the exchanges will no longer be allowed to facilitate the buying of crypto coins using Chinese Yuan and the trading of coins, they will continue to operate international-facing exchanges and other associated services. Smaller exchanges, however, will be closing for good. Those include Yunbi, which announced in Chinese it will shut up shop on September 20.

The impact of the crackdown sent bitcoin prices falling — with the crypto currency dropping below $3,000 on some exchanges for the first time in a month — but it quickly rebounded and, at the time of writing, it had nearly made up the losses.

As with all things bitcoin, it is difficult to be sure exactly why, but there are plenty of reasons.