The market for bitcoins, the digital currency loved by speculators and techie-gold bugs, took a gigantic tumble last night when the People's Bank of China and four Chinese regulators banned financial institutions and payment services from handling bitcoin-related business.
According to the central bank, this was done to "avoid harm to the public and to the legal monetary status of the renminbi" that might occur as a result of “excessive speculation” in bitcoin. However, the statement continued that "in using bitcoins as a trade commodity on the internet, ordinary people have the freedom to participate at their own risk."
Bitcoin prices in China plummetted 25 percent within two hours of the news. Prices on Mt. Gox, a Japan-based trading platform, fell by nearly 30 percent but, as is the nature of the internet's most volatile currency, they soon rebounded.
This may be because, as Quartz points out, China already banned bitcoins, four years ago.
Virtual currencies were banned from use in the real economy after transaction volume of Q Coin, a virtual currency developed by Tencent, grew to several billions of yuan per year. Some estimates suggest it made up as much as 13 percent of China's cash economy before the crackdown.
Most importantly, the recent announcement does little to stop bitcoin-bugs favourite pastime: speculation. Chinese bitcoin purchasers are still able to hoard the blocks of 1s and 0s while they watch the market plummet and spike wildly in relation to the slightest provocation, just like it did this week.
[Image via Flickr]
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