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China can knock down the Bitcoin rates

11 February 2017, 12:43 / RateGuru / Exchange Rates

The Bitcoin price has seen a 9 % drop during the night, from $1,060 to $959 in all major world Bitcoin exchanges. The short-term price decline is likely due to the announcement of Huobi and OKCoin concerning temporary disabling the Bitcoin and litecoin withdrawals for one month.

About 25% of the global exchange market is controlled by Huobi and OKCoin - two of the largest Bitcoin exchanges in China. Daily, the Bitcoin and litecoin worth $55 mln are processed by them.

On January 9, in the morning, almost immediately after a meeting between nine Chinese Bitcoin exchanges and the People's Bank of China (PBOC), Huobi and OKCoin have sharply disabled the Bitcoin and litecoin withdrawal for the period of up to one month. OKCoin and Huobi informed users that the requirement to update their systems to combat money laundering was made to ensure their compliance with the local regulations on financial and money transfer.

Before the dramatic announcement, the OKCoin and Huobi users did not received any letters or warnings. The Bitcoin and litecoin funds withdrawal stop in the Chinese market has driven the entire global Bitcoin Bitcoin exchange market into panic, bringing down the Bitcoin price, which was regaining its position after the initial fall caused by the meeting between the People's Bank of China and the Chinese Bitcoin exchanges.

The users of OKCoin and Huobi received identical statements. The exchanges asserted that lines of credit and cryptocurrency transactions at both exchanges will be immediately stopped. They also added that until the upgrade of the AML system has been completed the users will not be able to withdraw any funds, except for balances in yuan.

While OKCoin and Huobi expect for the one-month major repair of AML infrastructure, the CnLedger local news agency confirmed that the withdrawal of balances may be allowed to the users of OKCoin and Huobi if the upgrade is completed within the above time.

On Sunday, January 22, the People’s Bank of China attacked the Huobi and OKCoin exchanges for the cryptocurrency transactions using the AML system which does not comply with the local norms. Out of nine exchanges with active operations in the country, two were specifically addressed by the People’s Bank of China. They also were informed on the methods to improve or change the existing AML systems in order not to contravene the local laws.

In the meantime, the local newspaper Shanghai Observer informed:

“During the preliminary inspection of “OKCoin” and “Huobi” it was revealed that the margin provided by the platform contravened the rules that caused the abnormal price fluctuations in the market. The inspection also showed the platforms had not used the appropriate AML system compliant with local rules. Huobi failed to address the AML system issue which PBoC brought up during the preliminary inspection and visits, but nevertheless it terminated the margin trading after the PBoC announcement. In consequence, the pressure was put on the two exchanges from the PBoC to immediately upgrade their AML systems, and to temporarily stop withdrawals and transactions until the upgrade completion.

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