China’s Interference on Bitcoin Tests Currency’s Foundation

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Regulators have decided on a comprehensive ban on channels for the buying or selling of bitcoin in China. PHOTO: CHRIS RATCLIFFE/BLOOMBERG NEWS

Latest plans represents some of the most draconian measures any government has taken to control bitcoin..

BEIJING—Chinese authorities are moving toward a broad clampdown on bitcoin trading, testing the resilience of the virtual currency as well as the idea its decentralized nature protects it from government interference.

Regulators have decided on a comprehensive ban on channels for the buying or selling of the virtual currency in China that goes beyond plans to shut commercial bitcoin exchanges, according to people familiar with the matter.

Officials communicated the message to several industry executives at a closed-door meeting in Beijing on Friday, according to people who were at the meeting. Until last week, many entrepreneurs in China’s bitcoin circles had thought authorities might shut down only commercial trading activity while tolerating peer-to-peer, or over-the-counter, bitcoin platforms, which enable buyers and sellers to find each other and trade directly.

Word of a more serious tightening spread after the meeting and at least one Chinese platform last week announced it would halt one-on-one trading services per official instructions.

The Chinese plan represents some of the most draconian measures any government has taken to control bitcoin, created by an anonymous programmer nearly a decade ago as an alternative to official currencies, and word of it sent another wave of anxiety through the Chinese bitcoin community.

China has digitized its financial sector faster than any other nation. Authorities continue to support the trend, though their public comments also suggest concern bitcoin could weaken official control of the country’s money supply.

The crackdown on the bitcoin ecosystem represents Beijing’s possibly biggest effort so far to limit expansion of a system to rival the yuan. In a previous crackdown, in 2009, the central bank banned the use of tokens valued at billions of dollars created in China’s massive online-gaming networks for real-world purchases. ..............................