China demands all banks cease trading in Bitcoin

Summary:The cryptocurrency has suffered an extreme blow in China as the government bans banks and payment service providers from dealing in Bitcoin.

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China's central bank has enforced a crackdown on Bitcoin trading, demanding that all banks and payment service providers cease their dealings in the digital currency.

According to Chinese business website Caixin, the People's Bank of China (PBOC)'s latest ruling, taking effect April 15, means that banks and payment companies must close "all the accounts opened by the operators of websites that trade in the virtual currency."

In other words, all cryptocurrency trading websites—the equivalent of Mt. Gox or Polinex—operating in China must shut their doors. In addition, cash will be the only way for investors to purchase Bitcoins, according to one analyst who spoke to the publication.

"The only one way out for Bitcoin websites is moving their servers abroad and using the service of foreign banks and payment companies," the analyst said.

While the ruling has not been officially announced by the central bank, documents seen by the publication and reportedly sent to PBoC regional offices state that money can be withdrawn from the accounts before April 15, but deposits are no longer permitted. If banks fail to comply, "punishments" will be issued, although there is no clarity on what kinds of punishments these will be.

The document states that Bitcoin is not to be considered a currency, but rather a commodity—and, as a result, 15 trading websites were named whose accounts are due for closure. It added that investors trade at their own risk, but need to understand it is not legal tender.

The argument over whether cryptocurrency such as Bitcoin, Dogecoin, and Litecoin can be considered a true currency—and submissive to the same regulation and laws—or a commodity, is wide-ranging. However, the fluctuating nature of these investments as well as the continual risk of cyberattack and theft remain a problem.

Recently, Tokyo-based Bitcoin exchange Mt. Gox filed for bankruptcy after accounting issues, system errors, and cyberattacks resulted in the theft of customer Bitcoin worth millions. In addition, Bitcoin exchanges Vircurex , Flexcoin, and Poloniex have all fallen victim to hacking, and have been forced to freeze customer accounts, take slices out of profit, and even close down due to security problems.

Topics: China, Government : Asia, Tech Industry

About

Charlie Osborne, a medical anthropologist who studied at the University of Kent, UK, is a journalist, freelance photographer and former teacher. She has spent years travelling and working across Europe and the Middle East as a teacher, and has been involved in the running of businesses ranging from media and events to B2B sales. Charli... Full Bio

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