China’s Largest Bitcoin Exchange Halts Merchants Bank Deposits

Apr 27, 2014 3:29 am ET

April 27 (Bloomberg) -- BTC China halted local-currency deposits to clients’ China Merchants Bank Co. accounts, as lenders close accounts with Bitcoin exchanges amid government measures to check surging trading in the virtual currency.

The suspension aims to protect security of client funds and ensure stable operations, BTC China, the nation’s largest Bitcoin exchange, said on its official microblog yesterday. Merchants Bank banned the use of its accounts for Bitcoin transactions, according to a statement dated April 25 on the lender’s website.

“We saw the bank’s statement and we took the initiative,” the exchange’s Chief Executive Officer Bobby Lee said by phone today. The suspension has “basically no impact” on BTC China’s operations so far because clients can use accounts at other lenders, he said.

The People’s Bank of China banned financial institutions in December from handling Bitcoin transactions, reflecting concerns about the risk posed to China’s financial stability after trading in the digital currency surged in the nation.

Introduced in 2008 by a programmer or group of programmers going under the name of Satoshi Nakamoto, Bitcoin prices more than tripled in the past year, according to CoinDesk, which tracks prices across key exchanges.

CoinDesk’s Bitcoin Price Index slumped about a fifth after Caixin magazine reported March 27 that the PBOC ordered lenders and payment companies to close the trading accounts of more than 10 Bitcoin exchanges. Bitcoins recently changed hands for $453.80, according to the index.

BtcTrade, a Chinese exchange, said April 10 that an Agricultural Bank of China Ltd. sub-branch in Hangzhou will close its account by April 15 if its use for Bitcoin-related settlement services is continued. Account closures were also announced by Huobi.com and Btc100.org.

BTC China, set up in June 2011, has the biggest Chinese Bitcoin trading platform, according to its website.