Despite optimism that the recent struggles of China’s bitcoin ecosystem had been put behind the industry, the situation took what many in the West believed may have been a more grave turn last week when bitcoin exchange FXBTC announced it would cease operations due to what it called “unprecedented pressure” from the People’s Bank of China.
In a statement released on its website, the China-based exchange made the case that it was a successful operation buoyed by community support, but that it could simply not compete given actions by the country’s central bank that caused it to suffer “long-term losses” and impaired relations with financial partners.
Since the end of March, there have been continued rumours that China is looking to discourage digital currency businesses from interacting with its existing financial ecosystem, a development that has caused a decline in the price of bitcoin internationally and resulted in most major China-based exchanges reporting issues or ending relationships with financial providers.
However, speaking to CoinDesk, members of China’s bitcoin community suggested that the loss of FXBTC would not be as impactful to the local ecosystem as some have feared.
Community response
Eric Gu, co-founder of China-based VC firm Bit Angels Club, told CoinDesk that the exchange’s upcoming closure has gone virtually unnoticed by the domestic community, and suggested that its demise could be positive for the local ecosystem:
“I didn’t even hear any complaint from any of my dozens of [online bitcoin groups] groups. I think FXBTC had been long forgotten.”
500 Startups investor Rui Ma further contextualized the news, telling CoinDesk that FXBTC had a “mixed reputation” in the community.
Gu said FXBTC traded around 20,000 BTC daily, what he called a “decent daily volume”, though like other notable China-based exchanges it had been accused of faking these figures.
A broader market retraction
Other notable names in China’s bitcoin industry suggested that the announcement was perhaps part of a retraction in a market that had spawned too many new entrants at the end of 2013.
BTC China CEO Bobby Lee explained how FXBTC fits into this narrative, telling CoinDesk:
“FXBTC was the first of the new crop that opened in 2013, followed by another half to one dozen. I wouldn’t be surprised to see another half a dozen close shop in the next one to two years.”
By comparison, Lee indicated that only five to six exchanges, including BTC China, went online in China over the previous two years.
Further, although he expects more small exchanges to close in China and abroad, Lee expressed optimism that FXBTC would handle its shutdown in an orderly manner, adding:
“Let’s hope customers don’t lose any money or [BTC] this time around at FXBTC.”
China’s Global Bitcoin Summit nears
The news that FXBTC would cease operations comes ahead of China’s Global Bitcoin Summit, taking place in Beijing on 10th and 11th May, and amid reports that the PBOC may still be looking to more tightly enforce its regulation of the industry.
Ma suggested that a growing pessimism is taking hold in China, and that some are starting to question the ability of major exchanges to function long term – although others like Lee remain unconcerned.
Given that FXBTC is indicative of the challenges facing these major bitcoin businesses and of the ongoing regulatory battle or digital currency in China, there is likely to be more talk at the summit, where members of OKCoin, BTC China and Huobi are all listed as speakers.
So far, the event itself is still scheduled to take place as planned, though rumors have surfaced that speaker changes may be forthcoming.
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