China considers Bitcoin a “virtual good” and forbids banks of dealing with cryptocurrency

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People's Bank of China Photo: Wikimedia

People’s Bank of China
Photo: Wikimedia

The People’s Bank of China has issued an official document this Thursday (5) regarding the statute of the cryptocurrency in the country. The regulator announced that although it doesn’t consider Bitcoin a threat to the country’s financial system and it won’t forbid the trading made by “ordinary people”, it still believes Bitcoin carries risks to financial institutions.

Based on this, the authority decided to forbid any connection between digital currency and the Chinese banks and other similar institutions. In a document published on the People’s Bank of China’s website, it’s possible to read that, “at this stage, financial and payment-processing institutions are not allowed to trade Bitcoin”.

However, the bank didn’t ban trading platforms like the world’s leader BtcChina, but is now making them register with the proper authorities. Besides, user anonymity is not permitted anymore, so the cryptocurrency exchanges operating in China now must request identification documents from their customers. The companies also have to report any suspicious transactions to the authorities, in order to prevent illegalities and money laundering.

Despite the lack of radical measures and the fact that people are still allowed to sell, buy and make payments with Bitcoin, the announcement caused a significant drop in the cryptocurrency’s price on several exchanges around the world. According to Coindesk, BtcChina opened this Thursday (5) with a value of 7,005 CNY, but quickly lost 10 percent.

The value also dropped $300 on the Japan-based Mt. Gox after the Chinese announcement, but it has climbed again and is now over $1,000.

South Korea weights Bitcoin’s pros and cons
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Bank of Korea
Photo: Wikimedia

The document was published two days after another announcement, this one made by the Bank of Korea. The authority is showing some flexibility regarding cryptocurrency after the publication of a report on Bitcoin, which reveals that the institution is considering a measure to make virtual money legally available to the public.

However, the report also includes a negative opinion on the possibility of its use as a future currency in the country, the site Business Korea reports.

There are currently no stores in Korea that accept Bitcoin, except Korbit, which was created back in April to facilitate the trade of cryptocurrency.

The opinion of an expert
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David Woo

In the meantime, while countries decide on the future of the most famous virtual currency, Bitcoin scored a major endorsement from a finance guru. David Woo, FX and Rates Strategist at Bank of America/Merill Lynch, announced that:

We believe Bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers. As a medium of exchange, Bitcoin has clear potential for growth, in our view.

The Wall Street expert says that cryptocurrency only needs to wait for three things to happen, quotes Business Insider. Woo said that “our fair value analysis suggests that to justify the current Bitcoin valuation, it will need to (1) account for at least 10% of all global e-commerce B2C transactions, (2) become one of the top three players in the money transfer industry, and (3) acquire a store of value reputation close to silver”.

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Maria Santos

Maria is an experienced journalist currently living in the UK. She has been writing about Bitcoin and the altcoin universe since 2013. She is also a member of the Lifeboat Foundation's New Money Systems Board and a big cryptocurrency supporter.

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