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Financial Companies Banned from Making Bitcoin Transactions in China

Dec 5 2013, 8:35am CST | by , in News

Financial Companies Banned from Making Bitcoin Transactions in China
Photo Credit: Getty Images

The central bank of China has banned financial companies from making Bitcoin transactions. This action was taken after a boom in Bitcoin speculation on Chinese soil.

After a near 100% increase in the value of Bitcoin, the Chinese government banned its use by financial firms. The result was that the crypto-currency fell by 20% and now stands at $1000 on the BitStamp Internet exchange. The Chinese bank claims that it is a fake entity that only exists in cyberspace. The fact that it does not have a concrete reality makes it a wild card in the pack. 

Short of banning the virtual currency altogether, the central bank allowed people to deal online in Bitcoins provided they carried out the transactions at their own risk. After Bitcoin rose to the status of a speculative bubble in China, it provoked anxiety among the country’s elite. The disruption it was causing to the law and order situation was simply too much.

Bitcoin recently surpassed its previous rates by a record amount thereby making the Chinese market in Bitcoins even bigger than Mt. Gox. Mt. Gox is the Japanese market in Bitcoins which was the largest once but no longer holds that status. Besides the chaos that Bitcoin caused in the normal Chinese currency rates, it also raised fears of money laundering. 

Many Chinese are happy with the decision that was taken by their government. It was a common perception among the nation’s citizens that Bitcoin needed regulation. And there are risks that fraudulent sites pose to the hard-earned cash of individuals in China. It is too much to allow Bitcoin to operate without any checks and balances.  

Source: Bloomberg

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