As of December 2013, trading of the digital currency, Bitcoin, has been banned by China’s banks, although, Chinese citizens are still allowed to use the popular currency. Bitcoin value saw a large increase in 2013, but the recent ban caused its exchange rate to take a sharp hit following the ban in China.
Frank Langfitt from NPR’s Shanghai branch reports:
“China is the world’s biggest market for Bitcoin and has helped drive its explosive appreciation this year. Today, though, the People’s Bank of China appeared to prick the Bitcoin bubble here.
China’s central bank said Bitcoin is unsafe because it has few controls and makes it easier to launder
money and finance terrorism.
The bank said: ‘It does not have the legal status of a currency, and it cannot and moreover should not be allowed to circulate in the market as a currency.’”
Langfitt also reported that after the central bank of China issued the ban against Bitcoin use, “the price of Bitcoin fell from a daily high of about $1,240 to about $920, according to BTC China,” which is one of the most popular Chinese Bitcoin trading platforms that the country uses.
Bitcoin currency is unregulated
Because Bitcoin currency is unregulated, it can be used across international borders easily. This is one of the areas of concern that the central bank of China has regarding the currency, and one of the reasons for its ban. Because Bitcoin has no ties to a regulated banking system, the central bank and other critics of the currency are afraid that the currency’s anonymity allows transactions involving drug trade and other illegal activities.
One example of the unregulated use of Bitcoin can be seen by an experiment conducted by Austin Craig and Beccy Bingham-Craig. The Utah couple decided to test the acceptance of Bitcoin by using the currency to conduct all of their transactions in the US and abroad for 100 days. On the program “Here and Now,” from WBUR broadcasting, the couple described one of the first purchases that they made using Bitcoin currency. Austin Craig stated:
“I have a cousin that’s a dentist, and I had a toothache right before we were leaving on our trip. So he agreed to see me, and I set him up to take Bitcoin. And then a couple days ago he called me, and he was like, ‘So, I haven’t cashed in my Bitcoin, and I just checked the balance and it’s really high now.’”
Reuters reports, “Chinese nationals are major participants in the [Bitcoin] market and hold an outsized share of the total number of Bitcoins in circulation. Shanghai-based BTC China has recently become the world’s largest Bitcoin exchange by volume.” Despite the decline in the Bitcoin exchange rate due to the China’s banking ban back in December, there has been a 16-percent rebound seen during April 2014, possibly sparking a turnaround in the slowly declining Bitcoin market.
About the Author
Blair Thomas is the co-founder of eMerchantBroker.com the #1 credit repair merchant account company in the US. He has been in the electronic payments industry for over 10+ years. When he is not running his business he spends his time writing and producing music, which has been featured in a variety of films.