BTC China, the world’s biggest bitcoin exchange, is looking to raise an extra US$5 million within a year, even as regulators become increasingly wary about the risks surrounding virtual cash.
The Shanghai-based company is in talks with institutional investors at home and abroad, primarily venture capital firms, for the so-called Series B financing, vice president Kenneth Ling said in an interview earlier this week before China announced regulations to rein in the bitcoin industry.
The funding will exceed the US$5 million secured in its first round of financing in November, Ling told the Hong Kong Economic Journal’s EJ Insight on Dec. 3.
“We plans to devote more resources and capital in improving customer service, as well as research and development,” he said. “A lot of investors have approached us for cooperation.” He declined to reveal the company’s valuation.
BTC China, whose Series A financing was backed by Lightspeed China Partners and Lightspeed Venture Partners, is not alone in the funding spree. Officials from a number of platforms, including GoXBTC and RmBTB, told EJ Insight that they have been approached by suitors for possible investments.
“There have been Taiwanese investors asking for cooperation to expand into the Taiwan market,” said Eric Liu, chief executive of Shenzhen-based GoXBTC. The company plans to invest as much as 300,000 yuan (US$49,300) to set up a Taiwan dollar-denominated trading platform on the island in the next two months.
But the frenzy has finally come onto Beijing’s radar, prompting a warning from the central bank about the risks related to the digital currency.
The People’s Bank of China (PBoC) said on Thursday that financial institutions and payment firms are barred from handling bitcoin transactions. They can’t buy and sell the virtual currency or insure bitcoin-linked products, the central bank said in a statement issued jointly with four other regulatory bodies.
Bitcoin plunged more than 13 percent to below US$1,000 apiece after the announcement, from a Nov. 30 high of US$1,156, according to a CoinDesk index that tracks Bitcoin activity across global exchanges. Prices have surged 77-fold over the past 12 months.
The PBoC said bitcoin isn’t a currency with “real meaning” and that it doesn’t have the same legal status. Individuals are still free to participate in online transactions but they should shoulder the risk themselves, it said.
With a daily trading volume of up to 110,000 bitcoins, BTC China, founded in June 2011, has overtaken Japan’s Mt.Gox and UK-based BitStamp as the world’s largest bitcoin bourse.
The round-the-clock exchange, however, has come under fire for its apparently short-handed taskforce. People have complained about inefficient customer service, citing things such as a seven-hour response time to investor enquiries and a three-day process for account verification.
Ling said BTC China is hiring more staff, after having more than doubled its headcount to 30 since October to cater to the burgeoning demand. He wasn’t immediately available for fresh comment after Thursday’s PBoC announcement.
Bitcoin was first created in 2009 by an anonymous developer known as Satoshi Nakamoto. It allows users to exchange online credits for goods and services.
According to CoinDesk, there are now 12.08 million bitcoins in circulation, valuing the digital currency economy at nearly US$12.1 billion. Ultimately, only 21 million bitcoins are available from the “mining” process in which computers solve complex math problems.
Ling said regulators have had contacts with his company, apparently alarmed as more Chinese investors jumped into the high-risk, bubble-like bonanza. There are an estimated 10 bitcoin exchanges in China, catering to one million investors, operators and “miners” in the country.
“They are most concerned about the safety of investor money, internet security and whether this tool has been used in money laundering,” Ling said.
Hong Kong’s Financial Secretary John Tsang also urged investors and merchants to exercise extra caution when taking bitcoins. Some may conduct false trades to manipulate bitcoin prices, he wrote on his blog on Dec. 1. The virtual currency is also a favored platform for money laundering, making it vulnerable to international regulatory crackdown, he said.
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