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article imageBitcoin ban imposed on financial businesses in China

By Stephanie Medeiros     Dec 5, 2013 in Technology
The central bank of China decided to ban Bitcoin pricing, selling, buying, and product insurance for financial companies, citing that Bitcoin is an unstable virtual money despite continued investor interest.
The People's Bank of China has banned Bitcoin, the digital money that has seen a surge in prices over $1,000, and said Bitcoin doesn't have the same officially recognized legal safety net as other worldwide currencies when financial and payment companies are involved. Once the news broke out of the ban on financial companies from investing or using the digital money, Bitcoin prices plummeted 20 percent, according to Bloomberg.
Under the ban, Bitcoin can't be bought or sold by banks or payment companies, products linked to Bitcoin can't be insured, and financial companies can't provide pricing for Bitcoin as referenced by the central bank's official website. As reported by The New York Times, the official statement went on to say that Bitcoin is only a "virtual commodity that 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, the People's Bank of China did say that "the public is free to participate in Internet transactions," so long as they understand the assumed risks involved with Bitcoin.
Hao Hong of Bocom International Holdings Co. in Hong Kong said the virtual money brings on a higher risk of money laundering and fraud, on top of being difficult to regulate, and fully supports the decision the central bank made on Thursday. Other financial analysts have expressed similar concerns, such as former United States Federal Reserve Chairman, Alan Greenspan, who said the price of Bitcoin jumping over $1,000 only in a matter of weeks is more of a bubble, continuing to say it is "unsustainably high" and alleging that virtual money like Bitcoin shouldn't be considered actual currency.
Despite the ban on financial businesses from using Bitcoin, Chinese citizens have continued to use Bitcoin as currency and local businesses like shops and restaurants have begun accepting the digital money throughout China, most prominently in neighborhoods and cities outside of Beijing. Also, larger companies such as China Telecom Corp. will accept down payments in Bitcoin for their Samsung branded mobile phones.
Bitcoin has become a preferred payment system for both Internet transactions and some offline payments because of its almost completely anonymous status, allowing for the user to do payments essentially incognito and making it difficult to trace the Bitcoin back to its original user. Originally created between 2008 and 2009, it will be interesting to see what will come next in the near future as Bitcoin continues to become integrated into society.
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