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Bitcoin Collapses, Chinese Latecomers Get Fleeced

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“Capital flight” takes on a bitterly ironic meaning.

By Wolf Richter | 12 January 2017

WOLF STREET — The People’s Bank of China announced on Wednesday that it is probing the major bitcoin exchanges in Beijing and Shanghai – BTCC, Huobi, and OKCoin – for a list of violations, including market manipulation, money laundering, and unauthorized financing.

This is part of the PBOC’s efforts to crack down on capital flight, a major escalation from last week, when Chinese officials warned investors – if you can call them “investors” – to be careful with bitcoin. That warning came at the peak of the spike and tipped the whole thing over.

Ironically, China’s many other crackdowns on capital flight have pushed the hapless Chinese, who want their capital to flee, into bitcoin. It was seen as a way of converting their yuan into something other than yuan, which they fear will depreciate relentlessly.

The yuan lost 6.5% against the dollar last year, its worst year since 1994, which is nothing compared to some other major currencies, such as the British pound which lost 16.3% against the dollar, and the Mexican peso which lost 17%. But the Chinese are not used to getting whacked by a depreciating currency. It spooks them. […]

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