Chinese e-commerce giant Taobao bans bitcoin

Mainland's largest online marketplace cites new government regulations for digital currency ban

PUBLISHED : Wednesday, 08 January, 2014, 3:50pm
UPDATED : Saturday, 12 September, 2015, 11:45pm

Taobao, China's largest e-commerce platform, yesterday banned cryptocurrency bitcoin, the mining software and related materials, citing new government regulations.

The mainland giant said: "In an effort to promote healthy growth of the online trading market and more effectively protect our members' interests, Taobao will make several adjustments in compliance the relevant state regulations and policies."

The adjustments will take effect on January 14.

Online shops using the Taobao platform could risk losing their accounts if they are found selling bitcoin or the software and equipment used to create the digital currency.

This comes just as the value of bitcoin tumbled again after weeks of recovery, and once again highlighted its volatility.

The unit price reached 5,970 yuan (US$986) per coin on Monday, and despite a regained momentum due to wider acceptance of the virtual currency to pay for goods and services, it fell back to 4,718 yuan.

"The prices may have been reacting to the Taobao news" said Bobby Lee, CEO of China's largest bitcoin exchange, "but in the long term it won't affect bitcoin. People will find new ways of acquiring mining material.

"It looks like they're just being cautious in light of what PBOC issued on December 5 and 16."

A month after the People's Bank of China issued back-to-back demands on banks and third-party payment providers to cut off bitcoin's life support, social gaming platform Zynga announced a deal with BitPay, the online payment processor backed by Li Ka-shing. Online retailer Overstock as also decided to accept the virtual currency.

Despite the Taobao ban on bitcoin, Zennon Kapron, head of Shanghai financial research consultancy Kapronasia, said volume on exchanges has largely recovered. "With China trading, a lot of the less serious investors have left the exchanges as it is more difficult to trade … but the Chinese are intuitive people and have found funding ways that fit within the regulation."

A number of factors saw prices rebound sharply on the mainland, explained Kapron.

"The acceptance of bitcoin by Overstock and Zynga [played] a big part," said Kapron. "In addition, Chinese investors now have ways of exchanging bitcoin again, and we have got some of the key regulation out of the way as we know what the stance of the [People's Bank of China] is, so a lot of this is already priced in."

In Legco yesterday, Secretary for Financial Services and the Treasury Chan Ka-keung said no new rules were forthcoming to deal with the rise of bitcoin and other virtual currencies.

He came under fire from lawmakers for the government and bitregulator's stand-off approach. "The government has underestimated the speed of development of bitcoin locally and internationally," said lawmaker Chan Kam-lam.

Video: What's Bitcoin and how does it work?