BEIJING—Chinese authorities are moving toward a broad clampdown on bitcoin trading, testing the resilience of the virtual currency as well as the idea its decentralized nature protects it from government interference.

Regulators have decided on a comprehensive ban on channels for the buying or selling of the virtual currency in China that goes beyond plans to shut commercial bitcoin exchanges, according to people familiar with the matter.

Officials communicated the message to several industry executives at a closed-door meeting in Beijing on Friday, according to people who were at the meeting. Until last week, many entrepreneurs in China’s bitcoin circles had thought authorities might shut down only commercial trading activity while tolerating peer-to-peer, or over-the-counter, bitcoin platforms, which enable buyers and sellers to find each other and trade directly.

Word of a more serious tightening spread after the meeting and at least one Chinese platform last week announced it would halt one-on-one trading services per official instructions.

The Chinese plan represents some of the most draconian measures any government has taken to control bitcoin, created by an anonymous programmer nearly a decade ago as an alternative to official currencies, and word of it sent another wave of anxiety through the Chinese bitcoin community.


China has digitized its financial sector faster than any other nation. Authorities continue to support the trend, though their public comments also suggest concern bitcoin could weaken official control of the country’s money supply.

The crackdown on the bitcoin ecosystem represents Beijing’s possibly biggest effort so far to limit expansion of a system to rival the yuan. In a previous crackdown, in 2009, the central bank banned the use of tokens valued at billions of dollars created in China’s massive online-gaming networks for real-world purchases.

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A quasiregulatory body called the National Internet Finance Association of China (NIFA) warned investors about virtual currency trading in a statement last week and said that bitcoin platforms lack “legal basis” to operate in the country.

A goal of China’s monetary regulation is to ensure that “the source and destination of every piece of money can be tracked,” Li Lihui, a NIFA official told a technology conference in Shanghai on Friday.


A lack of clarity from regulators has fueled worries about how far the government will go. One uncertainty, for example, is whether the ban will affect bitcoin deals made over social-messaging apps such as WeChat. People in the industry say a wave of bitcoin users in recent days migrated from WeChat to the encrypted messaging service Telegram.

A broader clampdown will likely include blocking mainland access to websites of foreign bitcoin exchanges such as Coinbase in the U.S. and Bitfinex in Hong Kong, say people familiar with the matter.

Last weekend, the largest domestic bitcoin exchanges—BTCC, Huobi and OKCoin—all said they would halt trading services in the coming weeks, sending prices of bitcoin on the global market tumbling. Bitcoin traded at $3,947 apiece on Monday evening in Beijing, roughly 26% off its high of $4,960.72 on Sept. 1.

Industry advocates hail bitcoin for allowing users to transact with each other without the involvement of a central authority. In reality, users access the market for virtual currencies via services and businesses that are centralized in real locations and therefore are susceptible to third parties. Any attempt by China to interfere broadly in the bitcoin network would test that notion further.

Bitcoin is attracting attention as a wildly volatile, all-digital currency. How does it work? How are criminals taking advantage of it? How risky an investment is it? In this Bitcoin explainer, WSJ’s Jason Bellini has “The Short Answer.” (Originally Published April 12, 2013)

On the flip side, if bitcoin does prove resilient, China could be shutting itself out of a growing global market. As recently as last year, China accounted for the bulk of global bitcoin trading activity, but its share has dropped dramatically since the government started attempting to cool the market. China now accounts for less than 15% of bitcoin trading volume.


Blocking overseas exchange sites would add them to a long list of websites Beijing considers too sensitive, including Google and Facebook.

Chinese authorities haven’t made public their stance on virtual currency trading. The People’s Bank of China and the Ministry of Internet and Information Technology didn’t respond to requests for comment on bitcoin measures.

A document passed around at Friday’s meeting and reviewed by The Wall Street Journal instructs Beijing-based exchanges to unwind their operations and provide information on bank accounts used for clients’ deposits by Wednesday.

While China’s sway in bitcoin trading volumes has faded, the country remains a major creator of new bitcoin through a process called mining. Chinese bitcoin miners operate a vast collection of computers for the purpose in remote areas like northwestern Xinjiang, where they can access electricity for cheap.


Until now, Chinese miners considered themselves immune from Beijing’s evolving stance on bitcoin trading. One entrepreneur said miners are now worried about authorities moving to limit their operations. “Using VPNs as a workaround will be difficult,” he said, referring to virtual private networks that allow users to circumvent China’s so-called Great Firewall.

Chinese miners loom large in the global bitcoin mining network, also serving an important role in the upkeep of the bitcoin ledger. Potential interference in how they connect to and use the internet could disrupt, at least temporarily, both the creation of new bitcoin and the speed at which global bitcoin transactions are confirmed, say people in the industry.

The stepped-up tightening by regulators comes as China’s top leaders have been vocal about battling money laundering, in advance of an important leadership transition this fall. Last week, China’s State Council released guidelines aimed at better coordination between regulators to address the transfer of capital for illicit purposes.

—James T. Areddy in Shanghai and Liyan Qi in Beijing contributed to this article.