Bitcoin price dives $50 on new China rumor

Bitcoin prices fell by roughly $50 late last night following a story on China’s Caixin news service that the People’s Bank of China had privately warned banks and payment companies to close the accounts of bitcoin-related businesses.

According to a translation posted to Reddit, PBoC officials met with representatives from several large banks, Tenpay, PayPal and other payment service providers were on hand for the meeting, which was chaired by Central Bank Department of Treaty and Law Director Mu Huaipeng.

Central bankers have stated that this meeting is focused on Bitcoin’s significant price rebound after 4/15, which led to an awkward situation as accounts were not cleared to expectations. … It was in March that the PBOC issued the 《Notice on Further Strengthening Bitcoin Risk Prevention Measures》, that emphasized that commercial banks and 3rd party payments processors were not to perform services for Bitcoin trading，establishing 4/15/14 as a deadline. However，come 4/15，many Bitcoin trading platforms were still functioning; Bitcoin’s exchange rate also soared from 2,500 Yuan to 3,000 Yuan.

Shortly after the meeting, the China Merchants Bank released a statement (translation here) announcing they would be ceasing all business with bitcoin-tied companies.

In order to protect public property, safeguard the legal status of RMB as fiat currency and prevent money laundering risks, from now on, any institution or individual shall not use our bank account for Bitcoins, Litecoin and other transactions including money recharging and withdrawals, purchasing and selling recharging codes, shall not transfer money through our bank account for activities above as well. Once discovered, our bank is entitled to suspend relevant transactions or cancel related accounts.

Alipay, China’s equivalent of PayPal, also issued a similar statement.

Rumors that China is quietly moving towards a de facto ban on bitcoin has played no small part in the downward price trend seen since December of 2013. The price plunged to $360 earlier this month largely due to a rumor that the People’s Bank of China would be issuing rules banning all bitcoin-related businesses from holding bank accounts by April 15. That rumor, also published by Caixin, initially appeared to be untrue. April 15 came and went, with no statement from the PBoC and only a handful of preventative account closures by individual Chinese banks.

Unlike reactions to previous “China bans bitcoin” rumors, the sell-off today has been relatively mild. Given China’s ongoing hostility to bitcoin, many bitcoiners have adopted a “Bitcoin bans China” attitude. After nearly five months of consistently negative China news, the shock and panic appears to have worn off.

There may also not be all that much bitcoin left in China to ban. The total volume of bitcoin in China has decreased to a fraction of the late 2013 market share, so there may not be enough Chinese-held coins to influence the market as dramatically as in previous scares. Many Chinese exchanges have already announced plans to move their accounts offshore, to locations in Hong Kong or Singapore, should the PBoC take further action against bitcoin.

The price has recovered slightly since the drop earlier today, rising to $454 from a low of $440.