Bitcoin back: Major exchange resumes yuan trading

Bitcoin and money

Virtual currency bitcoin received some good news on Friday with one of the most prominent exchanges in the world resuming trading after a clampdown by the People's Bank of China (PBoC) in December.

BTC China is the longest-standing bitcoin trading platform in China and was until recently the world's largest bitcoin exchange, according to Bitcoinity.org. In December the company decided to stop accepting trades denominated in the yuan due to pressure on third-third party payment processor from the country's central bank.

However, Bobby Lee, CEO of BTC China told CNBC via telephone that the decision has now been reversed, just in time for the Chinese New Year holidays.

"Everything is hunky dory," he told CNBC. "Essentially the government never disallowed it."

(Read More: Bitcoin price halves as China clampdown escalates )

In December, China's central bank ordered third-party payment agencies - which provide clearing services for bitcoin exchanges - to stop any "custody, trading and other services" related to the virtual currency. The platforms were told to end working relationships with virtual currency exchanges before the end of January.

BTC China operated a voucher system in the interim to allow users to redeem their cash, allowing investors to change their bitcoin back into yuan. However, Lee revisited the ruling by the PBoC and determined that the warning was solely for banks and payment processors.

He told CNBC that the PBoC was actually implying that bitcoin exchanges just needed to register with the Ministry of Industry and Information Technology (MIIT), essentially recognizing currency exchanges as a business category and a legitimate business.

(Read more: Bitcoin crashes 20% on China clampdown fears )

BTC China is now accepting yuan deposits via its corporate bank account, but is still not working with the third-party payment processors. Lee said that the deposits meant that trades are a little more "cumbersome" and take a little longer.

When the news of the Chinese clampdown in December broke, the price of a bitcoin fell to below $600 and stabilized near $800 for most of December and January. Despite this week's news, the price hasn't seen any upside. On Friday the currency was trading at $929 on major exchange Mt Gox and $849 on CoinDesk's index, which measures a basket of prices around the world.

This lack of movement, according to Lee, is because of the "chilling effect" that the PBoC had on bitcoin in China. He said that trading volume in China has dropped since December and doesn't expect it to suddenly reverse. He believed that these third-party processors had lost a sizeable chunk of their business due to the ruling, but hoped that in the long term a more formal regulatory statement from the PBoC could allow the two sectors to work together once again.

(Read More: Canada rules bitcoin is not legal tender: Report )

Nonetheless, the stark warning of the volatility of bitcoin from the central bank in December was positive in many aspects, he added, with customers in China now more wary of the cryptocurrency.

"People should use their judgment with bitcoin," he said. "And they should recognize the volatility".

Bitcoin is a "virtual" currency that allows users to exchange online credits for goods and services. While there is no central bank that issues them, bitcoins can be created online by using a computer to complete difficult tasks, a process known as mining. Some 12 million bitcoins are believed to be in circulation, with a cap of 21 million - meaning no more bitcoins can be created after that point.

- CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81

image: © Zach Copley

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