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

The public is free to participate in Internet tran

[gl4ss]

"The public is free to participate in Internet transactions provided they take on the risk themselves,"

that should actually be a green sign.

any method that can be legally used to turn yuan into something else that can be turned into money - and can be moved electronically - is in big demand...

(no, I don't have any bc)

Re:Went down, then came back.

[Anonymous Coward]

The US dollar is backed by the full faith and credit of the US government. Bitcoin is backed by absolutely no one.

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.