Bitcoin value tumbles after Chinese bank ban
Chinese bank bans Bitcoin-based transactions on security grounds.
Chinese banks have been banned from handling Bitcoin transactions, prompting the value of the virtual currency to crash.
The ban was issued by the People's Bank of China. In a statement, the financial institution said the move was made to "protect the legal status of the yuan currency" and to "prevent money laundering risks and maintain financial stability".
The notice also states that Bitcoin "does not have legal status" and "cannot and should not be used as currency", before explaining the ban was imposed as the virtual currency does not have the backing of any nation or central authority.
Ordinary members of the public were free to trade in Bitcoins, the organisation said, but should be aware of the risks involved in trading in the virtual currency.
The move has sent the value of Bitcoins crashing, after the virtual currency soared in value over the preceding months. At the end of November the value of one Bitcoin peaked at over $1,000 for the first time.
However, the central bank said the virtual currency was being used by criminals and terrorists, hence the need to clampdown on Bitcoin transactions.
"[They] 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 said. "Relevant cases are under investigation."
The transaction ban comes after comments made by the former head of the Dutch Central Bank, Nout Wellink, who compared the hype around Bitcoin to the country's Tulip mania in the 17th century.
"At least then you got a tulip [at the end], now you get nothing," he told Dutch publication Z24.
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