China Bans Financial Companies From Bitcoin Transactions

quantr writes with this excerpt from Bloomberg: "China's central bank barred financial institutions from handling Bitcoin transactions, moving to regulate the virtual currency after an 89-fold jump in its value sparked a surge of investor interest in the country. Bitcoin plunged more than 20 percent to below $1,000 on the BitStamp Internet exchange after the People's Bank of China said it isn't a currency with 'real meaning' and doesn't have the same legal status. The public is free to participate in Internet transactions provided they take on the risk themselves, it said. The ban reflects concern about the risk the digital currency may pose to China's capital controls and financial stability after a surge in trading this year made the country the world's biggest trader of Bitcoin, according to exchange operator BTC China. Bitcoin's price jumped more than ninefold in the past two months alone, prompting former Federal Reserve Chairman Alan Greenspan to call it a 'bubble.' 'The concern is that it interferes with normal monetary policy operation,' said Hao Hong, head of China research at Bocom International Holdings Co. in Hong Kong. 'It represents an unofficial leakage to the current monetary system and trades globally. It is difficult to regulate and could be used for money laundering.'"

Comments

Re:Does it mean,

[Joce640k]

It means it's attracted the attention of the big players so they'll be the only ones making big profits from now on.

Anybody with enough capital can manipulate the bitcoin market (just like any other stock/share) - creating artificial shortages to drive the price up, dumping it into the hands of greedy individuals when it peaks, buying back when it crashes down. Rinse, repeat.

using BTC to buy yuan can drive yuan up...

[ananaMous]

... & they can't have that, now, can they? The push here seems to be to decouple the yuan in any big way from their own currency markets & see how that goes. As long as it means a low yuan, that might be fine by them. But then one yuanders: who really has the pretend currency?

Sounds like a GOOD thing for Bitcoin

[gman003]

Bitcoin exists because many people don't trust a) the major world governments or b) the major banking institutions.

So it is a *good* thing for some of those banking institutions from being prohibited from using Bitcoins. And really, banks do not need to be dealing with Bitcoins - do you really want a bank to be taking your money and "investing" it in Bitcoin?

Classifying it as a commodity, like gold or silver, for regulatory purposes makes sense, and much like there are few regulations on gold and silver themselves, these are regulations on the banks, not on Bitcoins.

Now, the anti-money-laundering stuff may be a cumbersome burden on Bitcoin exchanges, and tries to defeat the entire purpose of Bitcoin's pseudonymity, but the US already has similar restrictions, and they're not restrictions that are completely unreasonable. In fact, wouldn't regulations on converting Bitcoins to and from other currencies make people more inclined to use Bitcoin as an actual currency, instead of just a carrier system for other currency (the buyer buying BTC to immediately spend, and the seller immediately converting it back to a "usable" currency)? Even their attempts to undermine it seem likely to strengthen it.

Re:Went down, then came back.

[Alioth]

No, Bitcoin isn't "pegged" to any and all currencies, it's free-floating. Rather too free floating and volatile as the case may be.

The problem with Bitcoin isn't the absence of a central issuer, but right now the problem with Bitcoin is its extreme volatility. At the moment it's almost useless as a currency and it's being used as an instrument of speculation. It's far too volatile for any merchant (perhaps except the black market) to take seriously since it's value relative to all other currencies swings so wildly and so quickly and you have to convert BTC into your local currency to be able to use any funds transferred to you for the mundane things in life like buying food, electricity, housing etc. If I want to sell a thing worth about US$1200 in BTC, if I sold it at 9am today for 1BTC and waited a whole 15 minutes to convert this to USD, in the intervening 15 minutes I would have lost around $300 because of a wild swing in its value that happened over a period of just a couple of minutes.