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Bitcoin value dives after China banks ban

China has become the biggest Bitcoin market in recent months as buyers seek to profit from speculating in the currency.

Last updated: 05 Dec 2013 17:52
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China has not made Bitcoin illegal, but directive from central bank severely limits its potential uses [Reuters]

The value of Bitcoins, the virtual currency that has soared in recent months and made fortunes for some, plunged after China banned its banks from providing related services and products.

Prices on BTC China, the country's biggest Bitcoin trading platform --which had stood at more than 7,000 yuan (around $1,100) each -- plunged by more than a third to an intra-day low of 4,523.12 yuan.

The drop wiped more than $5 billion off the total value of the 12 million-odd Bitcoins currently in circulation.

They later recovered to trade at around 5,700 yuan each.

"Bitcoin is a certain virtual commodity, does not possess the same legal status as currency and cannot and should not be circulated and used in the market as such," the People's Bank of China said on Thursday in a statement issued jointly with other financial regulators.

Chinese banks and other financial organisations are banned from providing bitcoin-related services and products, it said.

It called for enhanced control of online trading platforms for bitcoins to defend against the possibility of money-laundering, and pointed out investment risks faced by the public.

"But ordinary people, under the premise of voluntarily shouldering the risk, have the freedom to participate in bitcoin trading as a kind of buying and selling activity on the Internet," it said.

Concerns have increased internationally over the money amid questions about regulation and the potential for fraud and abuse.

The French central bank also warnied against the use of bitcoin on Thursday, saying it is not only volatile but unregulated by authorities. 

"Even if the high volatility of the bitcoin is of possible interest for individual or professional speculators, they should be aware of the risks they are taking," the bank said.

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