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China bars banks from bitcoin transactions China's government banned financial institutions from trading in bitcoin on Thursday, in what analysts said was a restrained first step towards regulating the digital currency that has exploded in popularity in China and soared in value in recent months. A statement by the central bank and four other agencies said that, while the computer-generated currency does not yet pose a threat to China's financial system, it carries risks. It did not, however, curtail the use of bitcoin by individuals. "I think it's measured and it's positive," said Zennon Kapron, of the financial consultancy Kapronasia. "It does add legitimacy to the idea that it could be a nationwide accepted currency." The value of bitcoins on Chinese exchanges fell after the announcement, however, with one expert predicting the price could halve in the short-term. Digital currencies are generally highly volatile. Bitcoins have seen their value relative to the dollar skyrocket some 800 percent in the past two months as speculators have piled into the currency, according to bitcoinity.org. While there is no official data available, bitcoin market operators say Chinese nationals are major participants in the market and hold an outsized share of the total number of bitcoins in circulation. Shanghai-based BTC China has recently become the world's largest bitcoin exchange by volume. A statement on the website of the People's Bank of China (PBOC) said that the government would act to prevent money laundering risks from bitcoin, which is not backed by a government or central bank. The PBOC may have cause to be concerned about bitcoins, which are anonymous, untraceable, and can be carried on memory sticks or transmitted electronically, because they represent a potential hole in the country's capital controls. However, analysts point out that, given the tiny value of the total bitcoins in circulation relative to other currencies, it is unlikely to have much impact on the wider economy. EYES ON BITCOIN More cause for worry is the way these digital currencies have engendered a new wave of creative criminality focused on hacking online platforms and stealing bitcoins stored there, and their potential for use in money laundering, bribery and purchases of illicit products such as drugs and weapons. The government will require trading platforms that deal in virtual currencies such as bitcoin to register with telecommunications authorities, it said. The notice was issued jointly by the PBOC, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission and the China Securities Regulatory Commission and China Insurance Regulatory Commission. "This is an industry that will need to be governed or regulated. The safety and the well-being of the common user has to be taken into consideration. All this is expected," said Ron Cao, Managine Director at Lightspeet Venture Partners, which recently invested $5 million in BTC China. "'We've got a long way to go. This thing needs to be regulated at some point. We're studying it. Don't jump into it.' My read is that's the tone of the message." (End News) China may be one of the smarter places when it comes to not allowing its BANKS to began jumping on this wagon with full circle support.....like some other places are doing. The currency is backed by nothing but "speculation".... [Quote from Internet] Bitcoin is an open source peer-to-peer electronic money and payment network introduced in 2009 by pseudonymous developer "Satoshi Nakamoto". Bitcoin has been called a cryptocurrency because it uses cryptography to secure transactions. Digitally signed payment messages are broadcast to and verified by a decentralized network of computers all over the world [End quote] |
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