Bitcoin exchange skirts ban by banks

Currency exchange installs physical bitcoin ATM in Shanghai tech park

PUBLISHED : Thursday, 17 April, 2014, 1:09am
UPDATED : Thursday, 17 April, 2014, 1:09am

BTC China, one of the country's leading digital currency exchanges, has installed the mainland's first bitcoin ATM and launched an online app allowing individuals to buy and sell bitcoins using mobile phones, skirting local banking regulations seen as increasingly hostile to so-called crypto-currencies.

Rising interest from mainland speculators was credited for driving up global bitcoin prices last year to above US$1,000 on some exchanges. But a crackdown by the People's Bank of China has seen the digital currency sag, changing hands below US$530 on Wednesday, according to exchange-tracker CoinDesk.

That, in combination with scandals involving hacking, theft, and fraud, have put pressure on digital currency markets around the world. Tokyo-based bitcoin exchange Mt Gox has given up plans to rebuild under bankruptcy protection and asked a local court to allow it to be liquidated, The Wall Street Journal reported.

Unlike conventional money, bitcoin and other crypto-currencies are generated by computers and are not backed by any central bank or government, or by physical assets. They can be exchanged through nearly any file transfer mechanism for goods, services or cash - but the latter has proved a problem.

Many regulatory agencies around the world are concerned that digital currencies can be easily used for money laundering or the illegal purchase of weapons and narcotics, and have moved to control or prohibit their use in ordinary commerce.

In December, the PBOC banned financial institutions from trading in bitcoin, saying the government would act to prevent money-laundering risks from the digital currency. It did not ban trading by individuals. Last week, two bitcoin exchanges said their trading accounts at certain domestic banks would be closed down by the lenders.

Bitcoin China chief executive Bobby Lee said his exchange is still in operation and has yet to receive any notice from the bank that his accounts are being closed.

While trading volumes on his exchange are down 80 to 90 per cent from their peak, transaction levels were still healthy, said Lee, on par with levels last September before bitcoin's spike.

The new ATM-like services from BTC China do not involve the banking system at all.

The ATM, in a cafe at a mall in Shanghai's Zhangjiang technology park area, allows people to buy bitcoins directly from the exchange for yuan inserted into the machine. Users cannot withdraw cash.