China bars banks from bitcoin transactions
Dec 5, 2013
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.
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.
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.