China places no currency in Bitcoin

Bitcoin China

China says to Chiang Kai-shek all Bitcoins at the door.

China marches long and hard over internal financial institutions, proclaiming that Bitcoins "should not and cannot be used as a currency". The news sent Bitcoin exchanges into a dive like cormorants in the deep China Sea. But all is not lost -- or is it? Bitcoins have been bubbling back to the surface, or has China's stance drained all enthusiasm?

In IT Blogwatch, fearless leaders and bloggers quote pearls of wisdom from the little red book of Bitcoin. Not to mention: Financial advice from Whiz and Ice...

Your humble blogwatcher curated these bloggy bits for your entertainment, ably assisted by Stephen Glasskeys.


To start, Alex Wawro says there wawr things you should know:

Simply put, a bitcoin is an algorithm-based mathematical construct--a unit of measurement invented to quantify value. It's sort of like the dollar in that way--but unlike the dollar...bitcoins are decentralized. The original Bitcoin algorithm was created by a developer...but [bitcoin] is created, traded, and controlled by bitcoin users, rather than by a central authority like a bank or a government.


The currency also has a finite supply that's limited by design. The designed to generate 21 million bitcoins, and the system automatically regulates itself to ensure that the supply of bitcoins grows at a smooth, steady pace.   MORE


The best way that Michael Kan can, he will not dance around the issue:

"The bitcoin is a special kind of virtual product, it does not have the same legal status as a currency," [Chinese] authorities said in an online posting. "It should not and cannot be used as a currency circulating in the market."


To regulate bitcoin usage...China will implement anti-money laundering measures with sites that exchange [it]. This includes obliging users to register with their real identities.


China's main objection to Bitcoin is that the cryptocurrency is not controlled and issued by a central monetary authority...[China] also expressed concern that the number of bitcoins is limited, though it did not say why that's a problem. Another issue for the Chinese is that transactions with the currency can be done anonymously.   MORE


Straight from the horse's Party mouthpiece:

Bitcoin has no central issuer, limited amount, using four main features without geographical restrictions and anonymity. Although some people [call] Bitcoin "currency" is not issued by the monetary authorities. ... Bitcoin...does not have legal status and monetary equivalent, can not and should not be used as currency in circulation in the market.


In the future, the People's Bank will...continue to pay close attention to the movements of Bitcoin and associated risks.   MORE


News from China, says Brian Fung, now has traders in a fungk:

Bitcoin holders [woke] up to a bit of a shock [on Thursday]. The price of the virtual currency plummeted overnight on [the Bitcoin exchange] Mt. Gox from a high of $1,240 down to a low of $870 before recovering somewhat. ... In a statement, the People's Bank of China said that while Bitcoin doesn't currently pose a danger to the country's financial system, it is "highly concerned about Bitcoin trends."


It's not a little ironic that the announcement led to just the sort of volatility the bank was warning against.   MORE


Sniffing the ground, Amar Toor rooTs out criminal activity:

"As Bitcoin transactions can be done anonymously and are not restricted by location, it's difficult to monitor capital flows and it therefore facilitates money laundering and financing for terrorist activities," the People's Bank of China said.


"There have been criminal activities using Bitcoins, such as trading of drugs and guns," the bank added. "Relevant cases are under investigation."   MORE


Flipping bits, Jack Wang's computer adds the positives:

On [Thursday], [China] issued a notice warning citizens about the risks of Bitcoin. The immediate response was a steep drop in the bitcoin price, led by the Chinese exchanges.


The notice resulted in panicked selling that caused a precipitous drop in Bitcoin’s price. Nevertheless, steadfast Bitcoin China did not seem perturbed. Many regarded it as inevitable. One commented obliquely that this has “been in the making,” and another is simply gleeful because this announcement is “as positive as it can be given the circumstances.”


A well-regarded [Chinese] Bitcoin expert known online as Baozougongqinwang (...loosely translated as Rampaging Prince Gong...[and] real name is Ming Gong)...provided one particularly well-articulated perspective.


Prince...commented that the decision to not declare Bitcoin as currency is a definite plus for the [Bitcoin exchange] industry. His logic is that if the cryptocurrency is recognized as a currency, this would trigger all sorts of regulatory hurdles for the nascent startups in the country. For one, they would all have to be registered as financial institutions, a category of doing business with extraordinarily high startup costs.   MORE


Standing on a soapbox, we find a noisy Julien Noizet:

China’s central bank, the PBoC, banned financial institutions from doing any kind of business with [Bitcoin]. ... It was very unlikely that China would endorse a medium of exchange over which it has no control. This is also true of other central banks. Today, Business Insider reported that the former Dutch central bank president declared that Bitcoin was worse than the 17th century Tulip mania.


[The Chinese government states] that Bitcoin is “not regulated.” Horror. Well, not only it is the goal guys, but it‘s not even completely true: Bitcoin’s issuance is actually very tightly regulated by its own algorithm, which replaces the discretionary powers of central banks.


Something that is really starting to annoy me every time I hear it is that Bitcoin is not like traditional fiat money, as it is not backed by anything and thus has no intrinsic value.   MORE


Meanwhile, Gwynn Guilford is gwynn-ing like a Cheshire cat:

China’s statement [about Bitcoin] doesn’t change much.


The government banned using virtual currencies in the real economy back in 2009, cracking down on surging transaction volume of Q Coin [a] virtual currency [which] had grown to several billions of yuan a a rate of 15-20% annually. Some estimate it made up 13% of China’s cash economy prior to the crackdown.


First, it doesn’t alter the motivation. Though bitcoin could in theory function as a medium of exchange, few merchants in China accept it. Exceptions include e-commerce arms of Alibaba and Baidu, which are now banned.


As has happened with many other theoretically tradable assets (e.g. tea, bad art, Q Coin, maybe worm grass fungus), once bitcoin entered the Chinese market, speculators piled on. And as more and more online trading platforms sprouted up in China, speculation went mainstream, in much the same way that gold speculation has throughout this year.


The government’s policy also hasn’t altered Chinese access to bitcoin trading. It neither forbade people from trading bitcoin nor banned trading platforms like BTC China. ... That’s probably simply because it can’t. While the government could in theory block trading platform URLs, it can’t stop people from circumventing the Great Firewall to trade online (provided the platform accepts yuan, which Hong Kong-based sites can).   MORE

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