Bitcoin/USD tumbles as China implicitly bans banks from trading it

on Dec 5, 2013
Updated: Oct 21, 2019

**, Thursday 5 December:**

Today China’s central bank warned that financial institutions should not trade bitcoin and other virtual currencies. In a statement on its website, the central bank said that it will act to prevent money-laundering risks from the anonymous transfer of wealth via digital currencies.
China follows the Dutch central bank, the European Central Bank and the US Federal Reserve in publishing cautionary reports aimed at raising public awareness about the risks of using crypto-currencies.

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Although the People’s Republic of China has not stopped individuals from using bitcoin, it implicitly banned banks from trading the alternative money form, which is not backed by a government or central bank. The PBOC said while bitcoin does not yet pose a danger to the nation’s financial system, it carries risks of being utilised for illegal activities and for speculation.

Today’s statement followed the country’s first remarks on the booming digital currency back in November, when the central bank’s deputy governor Yi Gang had said that China was unlikely to acknowledge bitcoin’s legitimacy in the near future. Nevertheless, Gang had recognized the “unique” position of bitcoin to facilitate online transactions, adding that households are free to use as long as they took on the risk themselves.

Since the Chinese statement, bitcoin has crashed by about 15 percent, as of 09.18 UTC. Earlier today the digital currency tested its all-time high of $1240 but failed to exceed it, forming a potential technical double top.
China accounts for most of the trade in bitcoins and buying of the unregulated alternative form of money in the world’s second-largest economy has been widely acknowledged as the main reason behind the parabolic rise of the crypto-currency.

“China has the potential of really making or breaking bitcoin and its acceptance,” Zennon Kapron, managing director of financial consulting and research firm Kapron Asia said at the 2013 Bitcoin Singapore conference on 15 November.
For now, the People’s Republic of China has halted the vertical climb of bitcoin’s price as it has implicitly banned its acceptance in financial institutions.
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