Chinese finance firms banned from Bitcoin

China's merchant class is drawn to Bitcoin with the rise of e-commerce and confidence in Bitcoin as a safe asset, but China's central bank doesn't find Bitcoin so safe.
Posted By Sonali Basak  |  Dec. 5, 2013 at 12:20 PM
share with facebook
share with twitter

Dec. 5 (UPI) -- China's central bank won't accept Bitcoin as official currency, despite its rising popularity among Chinese merchants. The People's Bank of China said Thursday it is barring financial institutions from deposits and trusts of the Bitcoin virtual currency, but this isn't stopping businesses from taking Bitcoin transactions.

The reason for banning Bitcoin is due to concerns about money laundering and financial instability that could come from adopting the virtual currency. This comes after various U.S. regulators, including Federal Reserve Chairman Ben Bernanke, have given a nod to Bitcoin usage with proper regulation.

The Chinese regulator said in a notice that the virtual Bitcoin currency "does not share the same legal status of a currency. Nor can, or should, it be circulated or used in the marketplace as a currency.”

However, "ordinary members of the public have the freedom to participate in Bitcoin transactions as a kind of commodity trading activity on the Internet, provided they assume the risks themselves," the statement said.

Bitcoin prices are extremely volatile and have gone soaring in recent months with higher demand for the currency, its price close to $1,000 entering Thursday. But after the news of the Chinese clampdown, Bitcoin prices have plunged 20 percent. Some say the government is trying to cool the Bitcoin mania, and Bitcoin exchanges can expect more regulatory hurdles in the near future.

[Wall Street Journal] [NYTimes] [CNBC]

Related UPI Stories
Latest Headlines
Trending Stories