Bitcoin Banned In China Banks

Bitcoin has suffered a blow in China this week as the country's central banking authority has banned all China-based banks and payment systems from using any form of the virtual currency. This does not mean that everyday users of Bitcoin are banned from taking part in Bitcoin transactions, only that banks are barred from top to bottom.

A Chinese central bank statement today suggested that "Bitcoins are virtual goods and have no legal status or monetary equivalent and should not be used as currency." They added that citizens of China may still use the currency, but take the entirety of the risk into their own hands when they do so.

"Ordinary people are free to participate in transactions at their own risk." – People's Bank of China

This announcement has had a bit of an effect in trading in China today, with Bloomberg noting a point at which BitStamp had the price of Bitcoin fall below $1,000, a whopping 20% lower than it had been earlier in the day. Prices hit $875 at 6:02 Shanghai time, and appear to be stabilizing at least somewhat here at the end of the day.

Exchange operator BTC China noted that China has been the biggest trader of Bitcoin this year thus far. Also from Bloomberg is a quote from Peter Pak, head of trading of BOCI Securities Ltd., suggesting that growth is significant, but not disruptively so.

"The scale of the Bitcoin market isn't significant enough to disrupt China's financial system, but its growth has been very strong.

Regulators might be worried that this could get out of control in one to two years if they don't do something." – Peter Pak, head of trading of BOCI Securities Ltd.

Signs of the times. Have a peek at the timeline below for more information of the ramp up to this point and additional recent history on Bitcoin in general.