China no plans yet to legalize use of Bitcoins

A top official from China's central bank says the government will not recognize the legitimacy of Bitcoin, but adds that it will monitor the development of the virtual currency for future consideration.
Written by Cyrus Lee, Contributor

The People's Bank of China says it has no plans to recognize the legitimacy of Bitcoin, but adds it will not stop the use of the virtual currency among online users. 

In the country's first comments on the flourishing currency, the central bank's deputy governor Yi Gang stated the government was unlikely to recognize Bitcoin's legitimacy in the near future, according to a Sohu news report Friday. However, he acknowledged the digital currency's "unique" position to facilitate online payments and people are free to use it as they wish.

Yi added that he will monitor the development of Bitcoin for future consideration. 

Ben Bernanke, chairman of the Federal Reserve, said this week that while virtual currencies posed risks including money laundering, there were also areas where they might have "hold long-term promise" if it evolves to become a faster, more secured and efficient payment model. 

Yi's comments come amid Bitcoin's rapid growth in China in recent weeks. Data from the three largest Bitcoin trading platforms in the country revealed that the digital currency's average daily trading volume between November 1 and 20 more than doubled over the same period in October. BTC China became the biggest trading platform in the Chinese market, with daily transaction of nearly 90,000 Bitcoins, and attracted US$5 million in financing earlier this week. 

But the price of the experimental currency fluctuated dramatically in China this month. On November 1, a single Bitcoin was priced about 1,250 yuan (US$205). It surged to 2,000 yuan (US$328) on November 10, and peaked at 8,000 yuan (US$1,313) on November 19. The price then began to dip before stabilizing at around 4,300 (US$706) on November 20.

Trading volumes also surged, with BTC China hitting hit more than 56,000 Bitcoins between November 1 and 20, compared to the total trading volume of 18,474 in October.

In the Sohu report, Bitcoin trading platforms welcomed Yi's remark which they said was "good news" to investors, noting that while the government had said it would not recognize the legitimacy of Bitcoin, it had said people were free to use it. 

But others expressed concerns over the regulator's "indulgence" on the issue, noting that barriers to trade on Bitcoin were low which would attract more participants and potentially drive down the value of the virtual currency.

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