Bitcoin exchanges operating in China are attempting to tame the virtual currency and figuring out new ways to operate, as they look to stay in business following the government's recent clampdown.
Shanghai-based BTC China, for instance, has focused on stabilizing the currency by thwarting speculation, so the Chinese government will soften its grip. The People's Bank of China last month outlawed Bitcoin transactions among local banks and financial institutions, forbidding all third-party payment provides from handling the currency. The country's central bank had expressed concerns about Bitcoin's lack of legal status, high risks of money laundering, and potential association with illegal activities.
Following the clampdown, investors had hurried to cash out and merchants disassociated themselves from the virtual currency. Alibaba Group, which operates China's largest e-commerce site, this week said it would ban the sales of Bitcoin from January 14 including other virtual currencies and items related to Bitcoin, such as tutorials and mining tools.
To stay in business amid the clampdown, trading platforms in the country such as BTC China are looking at ways to work around the ban and to tame the currency, according to a report by Wall Street Journal (WSJ). Bitcoin exchanges make money through trading commissions and other service fees.
BTC China CEO Bobby Lee said the exchange was looking to avoid the "old Wild West days" of speculation that caused the currency to fluctuate and climb quickly. "The government will come down hard [when that happens]," Lee said in the WSJ report. He said he wanted the market to stabilize.
Currently valued at US$842.1, the price of Bitcoin skyrocketed to over US$1,222 on December 1.
Lee said BTC China had removed its trading fees in September, which drove trading volumes on the exchange and prices up. It reintroduced the fees last month to thwart speculative trading and planned to retain the trading charge.
The company also started distributing vouchers to enable users to buy and sell Bitcoins without have to go through a third-party to pay BTC China, as well as a rebate for some traders that bring users to the exchange. These initiatives were aimed at helping the site "get back in the game" as it had "been struggling a lot", Lee told WSJ. He noted that daily trading volume on BTC China had dipped to below 1,000 Bitcoins before climbing back up to 28,000.
According to the report, two other Chinese trading exchanges including OKCoin now allow users to make payments directly to bank accounts, which OKCoin's founder Xu Mingxing said did not violate the government's directive.
The digital currency, however, enjoyed a breather in Singapore where the government indicated more support. The Inland Revenue Authority of Singapore this week outlined tax requirements for transactions involving Bitcoin. Under its advisory, Singaporean businesses that offer the buying and selling of the virtual currency will be subject to taxation on the gains made on the sale. However, if the Bitcoins form part of the business' investment portfolio, the tax authority considers the gains from any sale to be capital in nature and not subject to taxation.