Surge in use of bitcoin leads to ban on China trading
People's Bank imposes curbs as China's appetite for 'risky' virtual currency causes value to soar
The mainland's central bank yesterday barred financial institutions from trading in bitcoin.
It was the first step towards regulating the virtual currency, which has seen a surge in value because of its popularity with mainland investors.
The People's Bank of China (PBOC) said no financial institutions, payment agencies or insurers should price products and services in bitcoin, nor are they allowed to trade or provide bitcoin exchange or settlement services. The announcement follows a near 90-fold increase in the virtual currency's value since it was created in 2009.
The rally has been caused largely by demand in China, with traders from mainland banks joining technology fans and speculators to invest in bitcoin.
Bitcoin's price slumped to below US$1,000 on major trading platforms after the announcement. It was trading at US$980 in the afternoon on BitStamp, down sharply from US$1,138.58 the day before.
On the Shanghai-based BTC China exchange, it was trading at 4,785 yuan (HK$6,053), compared with 7,050 yuan on Wednesday.
"Bitcoin is a bubble that will burst sooner or later," said Zhao Xijun, a finance professor at Renmin University. "Firewalls are necessary to separate risks in the virtual world from the real economy before it's too late."