The value of Bitcoin, the virtual currency, has decreased sharply after the Chinese central bank warned Chinese banks not to trade in the currency, Al Jazeera reports.
Prices on BTC China, the country’s biggest Bitcoin trading platform –which had stood at more than 7,000 yuan (around $1,100) each — plunged by more than a third to an intra-day low of 4,523.12 yuan.
The drop wiped more than $5 billion off the total value of the 12 million-odd Bitcoins currently in circulation.
They later recovered to trade at around 5,700 yuan each.
“Bitcoin is a certain virtual commodity, does not possess the same legal status as currency and cannot and should not be circulated and used in the market as such,” the People’s Bank of China said on Thursday in a statement issued jointly with other financial regulators.
Chinese banks and other financial organisations are banned from providing bitcoin-related services and products, it said.
The announcement follows recent similar statements from both the French and Dutch central banks against trading in the currency due to its volatility and lack of regulation.
According to the Guardian, Bitcoin has been somewhat successful in China, with significant trading through Chinese exchanges occurring on bitcoin trading information sites such as FiatLeak. As the virtual currency is untraceable, it is particularly suited for those looking to evade strict state capital controls for transactions such as moving money overseas or currency exchange.
The anonymity of Bitcoin’s transactions can also be used in more illicit trading, we have previously written about its usage in buying weapons online in China.
But, don’t worry, if you’re looking to make a quick buck or siphon millions of kuai overseas, trading for individuals is still legal according to the People’s Bank: “ordinary people, under the premise of voluntarily shouldering the risk, have the freedom to participate in bitcoin trading as a kind of buying and selling activity on the Internet.”
By Maea Lenei Buhre