(Reuters) – China’s central bank warned on Thursday that financial institutions should not trade the digital currency bitcoin, saying that while it does not yet pose a threat to China’s financial system, it carries risks.
The central bank also said in a statement on its website that it will act to prevent money laundering risks from bitcoin, a prominent digital currency that is not backed by a government or central bank.
It said however that ordinary individuals were free to use bitcoin, so long as they took on the risk themselves.
Bloomberg:
China’s PBOC Bans Financial Companies From Bitcoin Transactions
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 isn’t a currency with “real meaning” and doesn’t have the same legal status as a currency, the People’s Bank of China said. The public is free to participate in Internet transactions provided they take on the risk themselves, it said.
Regulatory oversight may restrain demand for Bitcoin in China, which BTC China said has become the world’s biggest trader of the virtual currency with more than half of global volumes. Surging Bitcoin prices have spurred investor protection concerns and prompted former Federal Reserve Chairman Alan Greenspan to call it a “bubble.”
The People’s Bank of China, China Banking Regulatory Commission and other regulators have held discussions about drafting rules for trading platforms that facilitate the buying and selling of the virtual money, two people with direct knowledge of the matter said. They were not authorized to speak because the information is not public.
“We’re happy to see the government start regulating the Bitcoin exchanges,” Chief Executive Officer Bobby Lee of BTC China, the largest Bitcoin exchange in the country, said today in a phone interview before the PBOC announcement was made. Regulations would be for “the good of the consumer,” he said. BTC is seeking recognition of the currency so it can be used to buy goods and services instead of being used for speculation, he said.
Bitcoin Rules
New rules for Bitcoin may not clarify Bitcoin’s legal status as regulators are divided over the issue, the people said. People are free to trade Bitcoin even as China refrains from recognizing it as a currency in the short term, PBOC’s Deputy Governor Yi Gang was cited by the 21st Century Business Herald as saying last month.
The growth of Bitcoin in China has come amid speculation that regulators may halt trading after police arrested three people on suspicion of stealing money from investors through a fake online exchange.
GBL, a Bitcoin trading platform that began operating in May and had 4,493 registered users at the end of September, abruptly closed on Oct. 26, the official Xinhua News Agency reported Dec. 3., citing police in eastern Zhejiang privince’s Dongyang city.
One investor who reported the case to the police claimed a loss of 90,000 yuan ($14,774), Xinhua reported, saying the total amount of money stolen was unclear. The Hong Kong Standard reported on Nov. 11 that investors may have lost as much as 25 million yuan after the site closed.
“Unsustainably High”
The value of Bitcoin traded at $1,130.33 apiece at 2:48 p.m. in Shanghai on BitStamp, an Internet-based exchange where Bitcoins are traded for dollars, euros and other currencies. It was quoted at 6,964.96 yuan on BTC China. The price was $1,217.84 on the Mt. Gox online exchange.
To Be updated!
