Just hours after it was first revealed that the People's Bank of China (PBoC) had held closed-door meetings with domestic bitcoin exchanges, new details are emerging about the conversations.According to a new report by Caixin, the PBoC sought to restrict how the exchanges could seek to acquire potential new users, with the central bank indicating that the startups aren't able to mention the depreciation of the yuan in connection with marketing or otherwise promote their services offline.Some of the involved exchanges were said to have cancelled planned activities that would have potentially utilized such a strategy.The article further states that exchanges were advised to comply with know-your-customer (KYC) and anti-money laundering (AML) laws, and to refrain from using automated trading bots to boost volume, according to translation provided by Eric Zhao, from the Chinese Academy of Sciences.A regional exchange employee wishing to remain anonymous dismissed the news as "no big deal" and unlikely to be motivated by any fears that bitcoin may compete with the yuan.

Another exchange employee, who wished to remain unidentified, expressed dissatisfaction with the reporting, alleging that some of the directives were not in fact new, though he did not provide clarity on which might have been previously given.Past precedent provides some hints, though, as bitcoin companies in the region, in one instance, have previously backed out of public conferences due to regulatory pressure.The comments notably follow news that China's State Administration of Foreign Exchange (SAFE) is looking into bitcoin under its mandate for stopping capital flight.At press time, representatives from BTCC, Huobi and OKCoin had yet to respond to requests for comment.Notably, such instructions do not appear to have been given to startups working on blockchain projects or implementations using the distributed ledger technology behind bitcoin or alternative cryptographic tokens.DJ Qian, CEO of blockchain-as-a-service startup BitSE, for example, indicated that the news "does not affect its business" due to its focus on non-monetary applications, a statement that was echoed in other responses.

Tong Li, CEO of Circle China, the bitcoin and blockchain-based messaging service, noted that he is not concerned about the directives or its impact on Circle's operations.However, he did suggest that the announcement would be worth "following closely".Blockchain investor Bo Shen, founding partner of Fenbushi Capital, expressed similar sentiment, indicating that he had not been in contact with any central bank officials about the topics discussed with bitcoin exchanges.Shen is one of the more prolific investors in China-based blockchain projects, backing firms including Juzhen Financials as well as a number of open-source, alternative blockchain projects.Adding potential insight is that Shen did offer a few words of advice to local exchanges, adding: "Two things I would like to remind those exchanges: high volatility is not good and strict accordance with KYC and AML."Interested in offering your expertise or insights to our reporting?In a report out today from Goldman Sachs about the future of money, the bank points out that 80% of bitcoin volume is now exchanged into and out of Chinese yuan.

The second-highest trading currency is the US dollar, followed by smaller denominations in yen and euros.The revelation of China’s bitcoin trading dominance seems to defy the logic that tight government restrictions would depress bitcoin’s adoption in the world’s largest economy.The amount of bitcoin trading activity in China has also risen, despite bitcoin’s precipitous price fall from last year’s $1,000-plus highs to less than $300 today.bitcoin litecoin farmerThe Chinese bitcoin surge comes against a backdrop of waning confidence in the Chinese economy, as the yuan weakens against the strengthening dollar and capital outflows—once rare in China—increase at record rates.bitcoin trader guiltyChina’s central bank clamped down on the cryptocurrency back in December 2013 when it banned bitcoin transactions at banks, retailers, and payment companies such as Alipay and Tencent.bitcoin rental mining

But the data show that bitcoin volume continued marching higher as bitcoin believers kept buying, selling and mining the cryptocurrency.The fact that China has become a major mining hub is a likely contributor to its high bitcoin transaction volume, according to a report from the U.S.-China Economic and Security Review Commission.bitcoin survey com legitThe report also notes that bitcoin has lured day traders looking to profit off of bitcoin’s volatility, as well as younger Chinese investors who might not have the money to invest in property or the understanding to invest in the stock market.ethereum ether market capBitcoin evangelist and crypto currency lawyer Roland Sun explained in an interview on industry website Lets Talk Bitcoin that there’s no explicit ban on buying, selling, or owning bitcoin as long as the central bank considers it a commodity, rather than a currency.bitcoin wealth distribution

He said “the only restriction imposed here is to block financial institutions and third-party payment processors from aiding crypto currency businesses (yet there are still many loopholes in reality to circumvent or even penetrate that restriction).” So until the Chinese government provides more clarity on its bitcoin stance, China’s bitcoin trade is likely to go on.by Tyler Durden Last September, when we predicted that Chinese consumers, investors and savers would flock to bitcoin as a medium of facilitating capital outflows (it was trading at $230 then, it is now three times higher), we also warned that bitcoin's upside would ultimately be capped by Beijing, when China's authorities realized how the digital currency was being used to bypass capital controls, and launch a crackdown on bitcoin, as they have with most other capital outflow measures .It appears that the time has come because, as Bloomberg reports, China’s regulators are studying measures to limit transactions that use bitcoins to take funds out of the country, citing people familiar with the matter.

According to Bloomberg sources, Chinese officials are considering policies including restricting domestic bitcoin exchanges from moving the cryptocurrency to platforms outside the nation and imposing quotas on the amount of bitcoins that can be sent abroad.Further indicating that Chinese regulators were "just a little behind the curve", they allegedly noticed only recently that some investors bought bitcoins on local exchanges and sold them offshore, evading rules on foreign exchange and cross-border fund flows, the report further reveals.A quick look at the uncanny correlation between the decline in the Yuan and the rise in the bitcoin, confirms that the digital currency has indeed been largely used to evade capital controls.As we have repeatedly noted, and as BBG repeats, "Bitcoin has surged 21% since the end of September as the yuan’s declines accelerated, boosting speculation Chinese investors were buying the cryptocurrency as a hedge against further weakness.With the risk of quicker depreciation rising along with the odds of an impending U.S.

interest-rate hike, policy makers are seeking to restrict outflow channels.Just a week ago, China limited the use of China UnionPay Co.’s cards to purchase insurance products in Hong Kong -- another way of taking cash out of the country."In intraday trading, bitcoin erased a gain of as much of 2.6% overnight which had taken it to the highest level since June, before rebounding, although it now appears that news of the report is starting to spread.As a reminder, back in 2013, the government classified bitcoin as a commodity and not currency, placing it outside the purview of the foreign-exchange regulator, the people said.That does not mean, however, that China is powerless at limiting bitcoin's upside.Several Chinese government bodies including the People’s Bank of China and the financial regulators said in a joint notice that year that bitcoin functioned like a digital commodity without the legal status of a currency.The central bank said in January it is studying the prospects of issuing its own digital currency and aims to roll out a product as soon as possible.