Potential Effects of the Unofficial Chinese Exchange Ban

This past Friday, September 8th at around 5pm Eastern Time, Caixin – a Chinese financial news publication – reported that Chinese regulatory authorities planned to shut down key bitcoin exchanges in China.

Nearly three days later, the three largest Chinese exchanges – Beijing-based OKCoin, Shanghai-based BTCC, and Beijing-based Huobi – have yet to hear any official word from the Chinese government in regards to the supposed exchange ban. 

The news directly follows a joint Chinese regulators’ official ban on Initial Coin Offerings (released on September 4th). 

OKCoin, Huobi, and BTCC rank 3rd, 4th, and 10th respectively in total 24hour trade volume out of all cryptocurrency exchanges.  OKCoin and Huobi trade primarily the LTC/CNY - Litecoin/Chinese Yuan - pair (24hour volume of $114.2 Million and $87.7 Million respectively) while BTCC trades BTC/CNY (24hour volume, $81.1 Million)*.

If an exchange ban were to become official, we see at least two potential, economic consequences to the cryptocurrency market:

(1). Trade Volume/Liquidity effects on specific currencies (namely LTC)

 Over $200 Million in LTC could potentially be frozen.  LTC has a current market capitalization of $3.6 Billion, thus approximately 5.5% of LTC’s supply could become impacted in the short-term. 

(2). Total Value effects within the Chinese Digital Asset Ecosystem

The value of each digital wallet linked to the Chinese exchanges may also be impacted – the exact size of that number is too difficult to verify.  

Until we receive updated information from the Chinese authorities on whether or not the exchanges will in fact be shut down, (and if they are, by what process will they return funds, if at all), we cannot exactly state what the true effects will be on the crypto market.  

*source: coinmarketcap.com/exchanges/volume/24-hour/