Having bounced back dramatically from the 20% plunge following China's ban of ICOs, Bitcoin is getting battered again this morning on very heavy volume as Caixin reports Chinese authorities plan to shut local Bitcoin exchanges.

Via Google Translate

The supervisory authority has decided to close the exchange of virtual currency in China , which involves all the currencies and currencies of the currency , such as "currency line", "coins" and "Bitcoin China." Journalists confirmed the news from the person who came close to the Internet Financial Risk Special Rectification Working Group (hereinafter referred to as the Leading Group) and learned that the resolution had been deployed to the local level. This is following the September 4 People's Bank of seven ministries and commissions joint announcement (hereinafter referred to as the announcement) after further supervision action. The announcement will mark ICO (Initial Coin Offering) as "illegal financial activities" and order the ICO to be banned on the date of publication of the announcement. All ICO tokens trading platforms need to be cleared to close the transaction.

Note, Caixin reports that the purpose of regulation is not limited to more than 60 ICO tokens trading platform, will not engage in a number of ICO virtual currency trading platform into the clean-up range, limited to close.

"In other words, the future in China can not have the so-called virtual currency and the currency between the trading platform." The close to the leading group, said: "In this way, there is no so-called tokens, virtual currency and RMB between the two Can not trade the problem. "

Of course, Chinese authorities are careful to point out how nefarious Bitcoin is...

Regulators believe that virtual currency investment activities for illegal fund-raising and other types of illegal financial activities provided a hotbed, easy to cause greater financial risk. Because ordinary investors can not distinguish between the difference between Bitcoin and Leigh coins, but also can not identify the difference between the various pseudo-virtual currency. And a large number of "money" illegal fund-raising activities are from the bitter currency frenzy, including the special currency trading places frenzy. "The bitter market is hot all the crazy 'currency' market and one of the root causes of illegal activities chaos, ICO crazy also from Bitcoin crazy. Bitco currency trading place chaos and bit currency hot , Triggering the use of Bitcoin to support illegal financial activities, including pyramid schemes, fraud and other issues.

All sounds very ominous, and the reaction is swift...

With all the largest cryptocurrencies tumbling...

However, if traders read the full report, Caixin explains the regaulory crackdown is on ICOs and not Bitcoin...

The domestic exchange between all the virtual currency and the renminbi, represented by Bitcoin, Etherfax, Okcoin, will be closed within the deadline; but the regulation is not against the virtual currency itself, nor does it prohibit the one-on-one off-exchange of the virtual currency.

The bottom-line appears to be - just as we saw early in the year - China cracking down on capital outflows by disallowing the exchange of fiat currency into crypto via local exchange. But, most critically, they remain open-minded to the private exchange of virtual currencies. This is exactly what we saw early in the year when local P2P services jumped up to support this 'private' exchange away from 'official' exchanges.

It appears the future of bitcoin trading will be decentralized.

Buy the dip?