Financial News

  • 20 December 2013, 10:13

Bitcoin Value Slumps Amid China Restrictions

The virtual currency Bitcoin has dramatically fallen in value after China's biggest trading platform banned deposits in yuan.

BTC China said the action follows new regulations from Beijing, which keeps a tight grip on the yuan and enforces capital controls, which the e-currency threatens to upend.

At its peak, Bitcoin traded at $1,250 (£764) but on Wednesday one Bitcoin was listed for sale for as little as $636 (£389).

Bitcoin was invented after the global financial crisis by a mysterious computer guru and can be stored either virtually or on a user's hard drive.

The e-money offers a largely anonymous payment system, which China's central bank, the People's Bank of China, warned can be used for illegal activities.

Two weeks ago it ordered financial institutions against providing Bitcoin-related services and products.

The central bank reportedly banned domestic third-party payment companies from providing clearing services for virtual currency trading platforms earlier this week.

Analysts worry the new restrictions will all but destroy Bitcoin trading in China.

"If the channel for depositing yuan in the platforms was completely cut off, all domestic exchanges would be invalid," James Gong, a digital currency expert and member of the US-based Bitcoin Foundation, told AFP.

"Bitcoin trading might be forced underground or shift to overseas markets," he said.

BTC China posted an apology on its website for the new ban on deposits, calling the measure "temporary".

"Due to new government regulations, BTC China will temporarily suspend CNY (yuan) deposits.

"Rest assured that BTC China will continue to operate normally. We deeply apologise for any inconvenience."

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