China might be gearing up to stop Bitcoin exchanges within their corner of the internet. This would include both OTC and P2P exchanges. China has a single Great Firewall that protects its digital borders from unwanted interactions. They could use this Great Firewall to block the IP addresses of foreign bitcoin exchanges, and it could also be used to destabilize the existing Bitcoin network within China.
A Broad Clampdown
According to an article published by the Wall Street Journal, several executives in a secret meeting held in Beijing were told by Chinese authorities that they are moving toward a halt of Bitcoin trading within their national network.
When news first surfaced that this might be a possibility, it was believed that China would leave OTC and P2P systems alone while they focused on commercial Bitcoin exchanges. Over-the-counter and peer-to-peer exchanges allow traders to deal with each other directly, but it seems as if China seeks to disrupt all Bitcoin activity within their borders.
Many Bitcoin exchanges in China have already been ordered to shut down, including Okcoin, Huobi, and BTCChina. When those shutdowns initially occurred, it made the price of Bitcoin fall, but the price has since bounced back. As traders take their business from Chinese markets, the trading volume of the giant nation has dropped to the fourth global position. Bitcoin exchanges outside of China have benefited from the movement, and volumes spiked to unheard of levels for many exchanges.
Blocking Foreign Bitcoin Exchanges
Once the initial internal clampdown has occurred, China will implement a policy that prevents mainland access to foreign Bitcoin exchanges, which include examples such as Bitfinex and Coinbase. The document claiming that China plans to fully block Bitcoin exchanges from its people hasn’t been verified, but many experts claim it’s authentic.
The Chinese document that discusses blocking foreign Bitcoin exchanges specifically mentions several such exchanges, including Okcoin, Coinbase, Coinone, Bitstamp, Bitmex, Localbitcoins, Bitflyer, Bittrex, and several others.
Bitcoin Node Blocking
The Chinese government plans to analyze the IP and DNS addresses for each foreign Bitcoin exchange, and the Great Firewall will block access to those exchanges by September 30th.
Not only will the Chinese government attempt to block foreign Bitcoin exchanges, but they will also try to disrupt network routing that allows Bitcoin into the nation in the first place. This could also stop Bitcoins from flowing across the border, which could effectively trap Bitcoins in the Chinese nation, making them all but worthless. VPNs and Tor will also be monitored since they act as Bitcoin network communication systems.
China’s Great Firewall has been a problem in the past, but some have gotten around it using VPNs and the Tor network. Unfortunately, such a solution would be difficult for Bitcoin users. It is slowly becoming illegal to use or sell VPN software, and the Chinese government is working to close every loophole it can.
Bitcoin Miners Are Worried Also
Despite the fact that China is no longer in the same Bitcoin trading position that it once was, it is still the largest market for Bitcoin mining. Up until now, Bitcoin miners working in the Chinese market were essentially immune from any negative repercussions. However, miners who pay attention to the rhetoric from the Chinese government are worried that they will be the next target once Bitcoin exchanges are closed. Entrepreneurs who sell Bitcoin mining equipment have noticed a drop in sales thanks to the panic in the general Chinese Bitcoin market. If Chinese miners are no longer able to trade the Bitcoins they mine, they will have no incentive to continue.