PBOC bars Chinese financial institutions from dealing with Bitcoins

Prices slump $300 from recent highs around mid $1200’s following the announcement

The digital currency has been on a tear for the past couple of hours after the PBOC has announced at 08:00 GMT that it is forbidding financial institutions in the country to handle Bitcoin transactions. The announcement is coming only days after deputy governor Yi Gang said that the public is free to participate in the crypto-currency markets. Apparently when it comes to Chinese financial institutions there is no encouragement whatsoever.

Bloomberg proceeded to reveal details about the statement on the People’s Bank Of China website reporting that the central bank said financial institutions and payment companies around China cannot give pricing in Bitcoins nor buy and sell the digital currency or insure Bitcoin-related products.

The popularity of Bitcoin in China has finally brought a more substantiated attention of authorities and revealed that it might have been seen as a way to go around capital controls imposed in the country. Some people were wondering when this might happen – well we didn’t have to wait for too long for clarification from the PBOC.

News agency Bloomberg cites Hao Hong in its article on the topic that according to the authorities Bitcoin represents an unofficial way to go around capital controls and the global trading of the digital currency makes it hard to regulate and makes authorities weary about its usage for money laundering.

The theme here is that Chinese authorities are not willing to allow Bitcoin to get out of control, while not being a big threat to the financial system now, the exponential growth in adoption of the crypto-currency as an alternative investment is worrying authorities enough so they considered it prudent to act before its too late.

It was very interesting to observe the reaction of the digital currency investment community. We are drawing our own conclusions about the optimism capsule within which market participants across Bitcoin exchanges are acting in. The news broke out on the newswires around 08:00 GMT and the price did not react much until after about 20 minutes have passed. Transactions are currently settling around $944 on Bitstamp. LeapRate will continue updating our readers on the subject, so stay tuned.

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