China moves to shut down bitcoin capital flight

From Zero Hedge:

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 recentlythat 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.

Expect more tightening on every pipeline out of China.