The Financial Times reports China’s two largest bitcoin exchanges halted withdrawals of the virtual currency after the country’s central bank met with a group of exchange executives to warn them about the need to enforce rules on money-laundering and foreign exchange. The ban on withdrawals comes after weeks of increased scrutiny surrounding bitcoin amid concerns that the digital currency could be used to facilitate capital flight. Renminbi exchanges accounted for 98% of global bitcoin trading during the past six months, according to data from Bitcoinity. In principle, buying bitcoins on Chinese exchanges then selling them on foreign exchanges could allow investors to skirt official limits on converting renminbi to foreign currency. In practice, industry experts say that poor liquidity and gaps between bitcoin prices on Chinese and foreign exchanges make large-scale fund transfers via bitcoin difficult, risky and expensive.
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