China Bans Financial Companies From Bitcoin Transactions | Hacker News Reader

China Bans Financial Companies From Bitcoin Transactions

bloomberg.com

175 pointskunle138 comments

According to someone on Bitcointalk.org, it might not be as bad as it seems (https://bitcointalk.org/index.php?topic=358341.msg3832549#ms...):

No. You Western guys completely misunderstood the news. To me, this is actually BULLISH!

TL;DR, the document says:

1. Bitcoin is a virtual commodity, not a real currency

2. People have the freedom to trade bitcoin, but they need to take their own risk

3. At this stage, financial institutions cannot denominate services and products in bitcoin, cannot trade bitcoin, cannot run bitcoin exchange, cannot provide bitcoin related services, cannot store bitcoin for clients, cannot establish bitcoin trust or fund, etc.

4. Bitcoin exchanges must be registered, and follow AML and KYC rules

This means major Chinese bitcoin exchanges like BTCChina will stay. You just won't see any Chinese bitcoin ETF anytime soon.

When is anyone at bitcointalk not BULLISH about bitcoin? It's not like they have a financial incentive to let it tank.

While many trolls and the like do roam bitcointalk, one can also find the occasional gem of rationality, insight, and common sense.

Some people are there because, if you can believe it, they are actually intellectually interested in the complex and novel dynamics (sociological, economic, technical, etc) found in bitcoin (or that may potentially develop as the system grows).

Also, I'd like to add that most of the FATAL FLAWS (TM) that the mainstream press is discussing today were discussed in great detail on bitcointalk since 2009.

It just happens to be a community that has had a great interest in creating and seeing bitcoin succeed. Of course, with growing numbers, the noise hides the signal, but take a look at the relevant subforums and you will indeed see serious discussions about bitcoin viability, previous challenges, future challenges, network security, scalability, etc.

Similar what (some?) countries in EMU were saying. It's not a currency, you can use it at your own risk. Also you can't print/create physical representation IIRC, i.e. money.

Same same but different. The PBOC has taken swift action, while other central banks have just been talking.

A physical representation of bitcoins (e.g. paper) would be terribly cumbersome.

To be clear, this already exists :) https://en.wikipedia.org/wiki/Bitcoin_protocol#Paper_wallets...

So in China Bitcoin status is equal to World of Warcraft goods (swords, shields, etc)? I mean WoW goods one can buy on eBay.

So, bitcoin prices plunge 20% on bullish news ?

Yeah, like for the Silk Road, until it bounces back with double its value in a matter of weeks. Bullish does not mean instantly bullish.

I disagree. This is not good news for Bitcoin.

>3. At this stage, financial institutions cannot denominate services and products in bitcoin, cannot trade bitcoin, cannot run bitcoin exchange, cannot provide bitcoin related services, cannot store bitcoin for clients, cannot establish bitcoin trust or fund, etc.

I don't speak Chinese so I can't speculate too much, but by the sounds of the Reuters article this basically rules out any hope of a Coinbase equivalent emerging in China, allowing people to transact freely between their bank and their BTC wallet. Banks in China aren't going to touch Bitcoin, or BTC-related businesses with a barge pole now. Not only this, anyone else planning on starting a Bitcoin business will probably have trouble with banks. It's really not good at all for BTC in China.

I disagree with you, I think that it means that a chinese Coinbase can't also be a bank, and since they just ruled that bitcoin is not a currency, it will be sold and bought freely as a commodity in this case a virtual commodity

Trading physical goods for virtual commodities? No thank you.

The pudding of bitcoin was the promise of a new currency.

Since it's decentralized, it doesn't need banks to prosper. That's the beauty of bitcoin. It can function as a currency while still being seen as a commodity in the eyes of the law.

Yes - it doesn't need banks. I think there is lots of confusion as to how this system works. As long as it's legal to own and exchange bitcoins, everyone can be their own financial institution.

I think I cant understand what a world run on bitcoin would look like without a global war.

I kind of agree.

The Chinese like to gamble, so something rocketing up was bound to attract speculators.

Some people claim this move is to prevent capital flight from China, which is possible, but unlikely given the volatility of the BTC-USD exchange rate and the need for someone trustworthy i.e. family to be on the receiving end of the transaction who then needs to liquidate and remain tax compliant (if applicable).

This sounds like when the dotcom bubble burst, and the so-called experts were saying "No, this is a GOOD thing! All your favorite stocks are on sale!"

The thing that propelled BTC from 200 to 1200 was the news that BTC was gaining popularity in China. If this news turns negative, then what is keeping the price high?

Then again, given BTC has been so strongly bought up, if it gets bought up here, then it just means it will keep skyrocketing, since buyer sentiment hasn't changed one bit.

Time to sell Bitcoin.

Merill Lynch just said buy Bitcoin, setting a target of 1300 (I hate the way Wall Street pulls these numbers out of thin air, but they are on the sell-side).

This is the same Merill Lynch who collapsed their own company with dodgy investments and had to be passed off to Bank of America, another company laden full of dodgy assets and dodgy accounting.

If these guys say "buy", isn't it time to run?

http://www.zerohedge.com/news/2013-12-05/bofaml-sees-bitcoin...

You can't extract intelligence from stupidity.

I worked in Treasury for a Fortune 500 with operations in 80 countries, responsible for FX hedging, and I can say that ALL banks are absolutely terrible currency forecasters. I can't blame them for being inaccurate, since there are so many variables that can impact an exchange rate between currencies, but it's important to note that forecasted currency rates have no merit.

By taking the inverse of anything they say, you're implying that they have perfect prediction power (even if it's inverted).

If you don't trust their predictions at all, then you should treat anything they say the same you would a random number generator.

I thought the value of BTC in china was that it enables ordinary people to workaround the current financial system.

They say "It [BTC] represents an unofficial leakage to the current monetary system and trades globally" ...

So, isn't a question of time before they ban the protocol in China ? I don't see why people use BTC in China, if it isn't for the freedom (workaround) that it gives..

It also means that in the interest of experimentation, the US will likely do the opposite of China.

Pretty disappointed in this statement from Greenspan:

“It has to have intrinsic value. You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. Maybe somebody else can.”

All money has no intrinsic value, including gold. Things have value because other people want them. That's it. People want bitcoin, then it has value.

Pretty much the only thing with intrinsic value is food since people don't want it, they require it.

Everything else has value because people say it has value.

There is a great post on r/bitcoin on this topic by Erik Voorhees. He talks about the value of network which gives bitcoin its value. A great read: http://www.reddit.com/r/Bitcoin/comments/1rxmk3/my_open_lett...

Networks come and go. Hard money, however, can still be found on hundred-years-old wreckage somewhere under the ocean.

That's because you happen to value gold just like someone else did 100 years ago.

But there are plenty of other forms of money that have vanished, from stone wheels, to shells, to papers. And all of those would be considered hard money.

Dollars have intrinsic value in that you can burn them to keep warm, gold you can make things out of, Bitcoins have no possible use outside of being a currency, thus no intrinsic value.

nobody feels safer with money because of that fact though, and besides 80%+ of money is as purely electronic as bitcoin is these days.

The heating value of dollars is a lot lower than the economic value. Same for gold.

Right now, but there were cases of people burning their money before.

I was just pointing out Greenspan's statement was correct. Obviously dollars have a higher extrinsic then intrinsic value.

I think Greenspan's point was that just like with stocks you have to be careful investing in things that have low intrinsic values, ie a company that is valued very high but doesn't make much money. This is why people view gold as a safer investment then dollars, it has a higher intrinsic value.

Dollar's are backed by a large hegemonic power, with control of its armed forces, which is capable of extracting taxes from its population.

This makes them valuable, unless you expect the US government to fall shortly. Bitcoin does not have these features. It also does not have the normal features of a commodity (i.e. industrial uses).

This means it has zero intrinsic value - nothing stablizes or enforces its value in anyway.

I certainly can't burn the dollars in my bank account.

Not directly anyway.

I have to go somewhere and take cash out which then I can burn, assuming the bank has that kind of money available when I attempt it and assuming I will be allowed to take it out.

Furthermore in many places such activity would be illegal.

Anyone arguing about Bitcoin without admitting that there is demand and basing everything on outdated/flowed theories is bound to be wrong with their predictions.

Bitcoin has intrinsic value because you can use zeros and ones as a desktop wallpaper. You can also leave messages for posterity in the blockchain.

I don't think the value of Dollars have anything to do with burning them for heat, especially in this electronic age.

Intrinsic value (in the context of finance) usually refers to the value of something when not used as investment or money. Gold has intrinsic value because you can use it for jewellery and electronics. A bitcoin has no intrinsic value because you only have it to get something else in return later.

Physical money has intrinsic value equal to the metal or paper it's made of. Of course that is not what makes physical money valuable and I am equally confused by that quote.

>> Physical money has intrinsic value equal to the metal or paper it's made of. Of course that is not what makes physical money valuable and I am equally confused by that quote.

USD/EUR/JPY currency (either physical as bank notes and coins, or electronic) has intrinsic value because it is almost universally accepted, taxable, and backed by debt that (at least in theory) will have to be repaid at some point in time. Bitcoin proponents like to point out that bitcoins are decentralized as if that's only an advantage of the currency, but it's the fact that commonly accepted currencies are centralized, controlled and regulated that makes them trustworthy enough that people keep accepting them in exchange for goods or labor. It's called 'fiat money' for a reason. Bitcoin has none of this, and the 'value' it derives from the 'trust' people buying them is based on nothing but speculation and hype. Anyone who thinks otherwise is fooling themselves.

Disclaimer: I'm not 'anti-bitcoin', 'anti-cryptocurrency', 'pro-government' or a big fan of fiat money and how central banks are handling it. I'm just stating my observation how the bitcoin hype and echo-chamber has made people almost blind to see the risk it will some day go to zero (maybe soon)

Well said IMO. It's been a while since tulip mania and could bitcoin be a modern day version?

Same disclaimer as above.

The tulip mania is probably a myth.

If you consider those things to bestow "intrinsic value" (a fallacious concept), the Bitcoin has "intrinsic value" because it is portable, divisible, fungible, scarce, and has all the other properties we want from a scarcity-based currency while having all the great benefits (and more) of digital fiat money.

Bitcoin isn't portable (you can't carry it, try using it without the internet).

All regular currencies are fungible and its super-questionable that BTC is divisible (the network can't handle more then what, a million transactions per second? What's the use of a currency that splits into microscopic sizes if you can't make lots of micropayments with it).

This must be red herring day on HN.

USD may be the most ubiquitous currency on the planet. However, go visit a country like Japan. Once you're out of reach of any currency exchange, you won't have much luck using your USD. Ironically, you'll have better luck using a Visa/Mastercard (which, btw, are not used anywhere other than perhaps ATMs). Those credit cards require a network to be used.

I've been to Internet cafes in Japan. But I never bought a single thing with USD. I don't see Bitcoin having any issues here. Internet is more widely available than places that take whatever your paper currency is.

You can easily take Bitcoin with you. You take your credit card with you. Both require electronic communication to work. There is no difference here.

Once your out of the reach of any currency exchange, you won't be able to use Bitcoin either, what's your point?

The difference is, all national currencies have an offline only form which is good anywhere within that nation. Bitcoin does not.

The value of money is grounded by the fact that you have to pay your taxes in it or you go to jail. This doesn't determine the absolute value or prices, but it stabilises them. This stability is the inductive step that allows the "base case" value derived from the gold standard to filter through to the present (minus inflationary effects).

Who would want to use a fiat currency that's printed with wild abandon, if they had the option of completely disregarding it and using say, a gold-backed currency instead?

>> Of course that is not what makes physical money valuable and I am equally confused by that quote.

Not going to jail is pretty valuable, and that's what governments "give us" in exchange for paying taxes in their fiat currency of choice. It's quite simple.

The quote is bit out of context. He was asked if bitcoin could be the new gold.

http://www.bloomberg.com/video/greenspan-on-bitcoin-i-guess-...

The intrinsic value of paper currency, I suppose comes from the promise of the central bank to pay its value on demand. In the 'good old days' this was a promise to pay its value in gold, but now its in the settlement of your debt. In Bitcoin that promise is peer-to-peer. Whether that makes it a successful currency is a fascinating, but open, question.

That's the value imparted on the paper currency, not its intrinsic value. Its intrinsic value is that of a piece of paper with interesting designs on it.

>A bitcoin has no intrinsic value because you only have it to get something else in return later.

The intrinsic value of Bitcoin is the payment network. That may not be a physical good, but it is a powerful idea.

Bitcoin has an intrinsic value

A distributed ledger with proof of ownership that makes it impossible to forge transactions

That my friends is a first in history, Greenspan and others have not realised yet the implications of this.

> A distributed ledger with proof of ownership that makes it impossible to forge transactions

All that means is that I can prove beyond any doubt that I own something that's worth nothing... :-)

Only if you don't think USD, JPY, GBP, and all the products and services you can buy with BTC are worth anything either.

I thought it was pretty funny coming from grandfather sql queries.

The thing is, most of the money/credit that has ever been created (derivatives and such) makes the amount the physical money in circulation a joke in comparison. It's as if some bitcoin enthusiast decided to etch a bitcoin wallet onto gold (because that has "value" since jewellery and electronics have been deemed "valuable") and placed a fraction of a bitcoin on it compared to the total that have been mined so far.

It's also interesting that an ever so fluctuant of a social construct is used to justify existence of one thing over another thing. One would think existence alone would suffice, but I guess that is not what man seeks…

More than that, bitcoin has intrinsic value in that it solves a very hard problem in computer science, to trust a network of perhaps untrusted peers (up to 49% of them). The protocol itself I would say is of same value as the idea to use paper for value instead of carrying around heavy metals.

How come some paper has more value than other paper. Intrinstically they are the same.

The bitcoin protocol may have intrinsic value, but that does not transfer to individual bitcoins.

It does when the consensus protocol is solely concerned with the movement of bitcoins.

Currencies that are legal tender have intrinsic value as a means of discharging debts. In particular, they can be used to pay tax.

Why would you be disappointed? Greenspan's true colors are well known. (Hint: green not gold.)

one response to Greenspan's statement:

“[Congress|WallStreet] has to have intrinsic value. You have to really stretch your imagination to infer what the intrinsic value of [Congress|WallStreet] is. I haven’t been able to do it. Maybe somebody else can.”

>Things have value because other people want them. That's it. People want bitcoin, then it has value.

No, things have intrinsic value for an underlying reason. People don't just want random stuff out of the blue, there's always a reason. Look at it from first principles:

Gold: Rare, soft, lustrous metal that interacts with our genetic programming in some strange, emergent way that creates a strong desire for it most humans' psyche. No rational reason, a reason nonetheless - people covet it, and as a result of that demand plus sparse supply, it has become a status symbol throughout most of human history and across all cultures that had access to it (Western, Mid Eastern, Far Eastern, South American). Also, better conductor than copper for some industrial uses.

Money: Utility + Fiat. It's much easier to store your wealth in coins, bills, or bits in a bank computer than in cows, lumber, corn, or iron. Also much easier to transact exact amounts than in cows, lumber, corn, iron. And, doesn't die, rot, or go bad over time (inflation jokes notwithstanding). That convenience is desired, hence has value, which drives demand for it. There are also some things that only money can buy, or pay for - taxes, oil, etc. Everyone is required to have money for such things, hence demand for money is increased.

Bitcoin: Solved the problem of trust in unregulated, no-central-authority, P2P transactions, eliminating the middle man, enabling people to save money on direct transactions while sufficiently mitigating the fear of fraud that would otherwise sink the whole endeavor (and has in past attempts). That utility = value = demand.

Things that have value and demand, have it for a reason. It's not just b/c people randomly decide it does.

That Greenspan can't see this merely suggests he hasn't spent much time trying to grok bitcoin. Didn't read the source code, didn't install it and play with it to learn how it works, doesn't read any discussion of it at bitcointalk or the btc blogs or anything. He's applying old world thinking to a new world of cryptocurrency, and hasn't adjusted yet.

From the Google translation of the original source:

"However, Bitcoin transaction as a commodity trading behavior on the Internet, ordinary people have the freedom to participate in the premise own risk."

The new bitcoin policy here isn't that much more conservative than the USA's bitcoin policy, and Beijing just legalized bitcoin for ordinary citizen gamblers, speculators, savers, and options traders! This is a good sign for bitcoin, and the market is reacting negatively anyways, probably encouraged by whales selling off trying to hit stop loss orders.

As the Chinese social-mediasphere dissects this announcement over the next day, the price should recover. Great buying opportunity right now for the short term, even if you're not long on bitcoin.

I don't see how it's a "good sign for Bitcoin". Until now people thought Bitcoin is going to explode in China, but now China put some serious restrictions on it. Why would that be a good sign?

Also, what happens if exchanges won't be allowed to have a bank account with the banks either? That's always been one of the biggest fears regarding Bitcoin - that if the governments decided to go after Bitcoin, that may not kill Bitcoin, but it would seriously slow down its growth and liquidity if they made it illegal for exchange companies to exchange Bitcoin.

The restrictions appear to be placed on banks and other financial institutions creating any bitcoin related instruments (ETFs, etc.) or dealing directly with bitcoin (eg. exchange RMB for BTC or the reverse). Also, it would essentially prevent a bank using it's reserve for a bitcoin investment.

Exchanges can still operate as exchanges and can continue to have bank accounts as long as said banks do not deal themselves in bitcoins.

Individuals and businesses are free to use bitcoin. This is actually very good news. The government was silent all this while and though they haven't said "Bitcoin is the new reserve currency", the Chinese stance is essentially the exact same stance that the US Senate took last month. I'm sure US banks also cannot deal with something that isn't a 'valid currency'.

This is a much better translation of the bitcoin notice: http://www.reddit.com/r/Bitcoin/comments/1s5hzl/my_human_tra...

I think it's a bad sign for the Chinese, not the bitcoin. If the central bank doesn't regulate it's trade, they're slowing down the time it takes for Chinese to trade compared to other countries.

It just means only private wealthy companies can facilitate the trades -- which is dangerous in itself. By opting out of controlling bitcoin transactions, I think the Republic of China is in some ways harming its only citizens. People will trade btc whether the banks support it or not, the chinese gov can help regulate this, but if they choose not to, they're hurting their own citizens.

The CCP pervasively makes decisions that can harm its people. I didn't realize people were seriously considering the idea that the PRC was going to offer a national trade in bitcoin.

Bingo. And there's no way in hell that the CCP would let equity slip out of the country in any large amount.

Wouldn't keeping equity in the country be in the interests of the people anyway? It's the wealthy who want to ship their wealth overseas.

Restrictions like these were always going to happen. Whether they take them further like you've said is the big question. For now, it's going to continue to grow, short term at least.

I do find it remarkable how similar bitcoin proponents are to goldbugs - all news is good news and all drops in value are buying opportunities.

That is actually not only true for goldbugs, but for all financial bubbles. If you had asked someone about AAPL in summer of 2012, they would have told you that any specific news item was bullish. If you had asked someone about crude oil in 2008, they would have told you that any specific news would drive the price higher. It is the same pattern over and over gain. Once the goldbugs throw in the towel and admit that they were wrong, it will be a good time to actually buy gold.

Yes, you're right, this applies equally well to the dotcom bubble, housing markets or any other bubble. Disconnects between value and price can happen in any market, and they're very hard to recognise, though if you find yourself rationalising incredibly bad news like this as having an upside or being a buying opportunity, and dismissing falls/rises of 20% in hours as normal, or claiming that an asset is inevitably going to rise in value, you're probably in a bubble.

I can't even see a clear lower-bound on the value of bitcoin as there is with say housing (rental value) or oil (use value), though it does compare well to shares - it could easily go to zero in the long term and is likely to fluctuate wildly based on sentiment in the meantime.

Interesting look at the lower bound that got a lot of bitcoiners angry. The comments are actually pretty good as the initial author did miss some of the finer points on bitcoin to which he responds in the comments.

http://neweconomicperspectives.org/2013/12/fair-price-bitcoi...

> dismissing falls/rises of 20% in hours as normal

That is pretty normal for bitcoin though isn't it?

They are linked at the hip in many ways. Bitcoin is a speculative asset, but it is also a really well thought out accounting ledger and transaction protocol for that asset. Plus m-of-n transactions, watermarking, etc... lot's of cools stuff.

When people talk about the speculative nature, they tend to sound like Glenn Beck. When they talk about the technology, they sound more like techno-futurists. I like now that economists other than Austrians are getting into analyzing the possibilities. It isn't what the worst bitbugs want to hear (bitcoin taking over all currency and forcing global financial institutions to crumble), it is more contemplating how bitcoin fits into the complex monetary, financial, fiscal, etc world that already exists.

Any publicity is good publicity. Applies to emerging markets as well, maybe especially since they require awareness which can be hard to gain without public discourse.

"Bitcoin prices plunged after the PBOC announcement."

Where? It's still trading over $1000 on every exchange I follow. This announcement seems to have almost no perceptible effect on the price of Bitcoin.

This is an interestingly biased article, actually. It quotes Alan Greenspan, whose history as a stubborn gold bug (in his Ayn Rand worshiping days) and whose pretty awful performance at the Federal Reserve make his opinion on this matter somewhat expected and mostly moot.

I'm willing to believe Bitcoin is overvalued for its current utility. Maybe. But, this article exhibits such a lack of understanding of what it is that I find it hard to take them seriously when they discuss what it might be worth or how this policy in China will effect it.

Are you watching the markets now? It just dropped 100 points in a few minutes on the exchange I'm using (coinbase).

> Where? It's still trading over $1000 on every exchange I follow. This announcement seems to have almost no perceptible effect on the price of Bitcoin.

Well, the prices did drop about $200 on MtGox after the news. It's debatable whether this qualifies as 'plunged'.

in any other situation a 20% drop in value would be considered a "plunge" I think

The thing is this is relatively "normal" volatility for Bitcoin. It bounced up 80-90 points again briefly at my broker a short while ago. Back down. Up 50 or so points again since then.

It doesn't look particularly related to this news, to me. It's been bouncing around $1000 for days.

http://bitcoincharts.com/charts/mtgoxUSD#rg60ztgSzm1g10zm2g2...

Someone else posted a chart of the price in China, which does look like a "plunge" though the scale on the image is somewhat misleading (it also only "plunged" 17% or so).

I'm having a hard time viewing this level of volatility as surprising for Bitcoin. It's had a number of much larger drops, including recently (when it climbed to 700 and dropped back down to 500, for instance, on no news). I believe one has to view Bitcoin in the context of Bitcoin, and right now it is an extremely volatile creature.

It was over $1200. 17% drop in an hour or 2? That's a plunge.

Is it still a plunge if it's going to be followed by soar?

Yes.

The CNY price dropped from around 7000 to below 5000 briefly, as I was watching it on www.bitcoinaverage.com. That's a 28% drop in a few minutes, which surely qualifies as a plunge. It does seem to be recovering, which makes sense since the announcement wasn't particularly aggressive.

We've seen similarly large drops as recently as two weeks ago. This kind of volatility is still normal for Bitcoin. I don't get why folks expect it to be more stable than it is right now. It simply can't be...there's too much new adoption and too much uncertainty and to much evolution happening in the market. We're going to see more drops like this in the future; we've seen it on no news, on more than one occasion.

I agree. I was merely answering the question posed.

More than anything else, there is just too much speculation. Much much more than adoption of bitcoin as a currency.

~50 minutes after your comment the price is $900 on MtGox and $850 on Bitstamp and BTC-E

I wish I hadn't slept through that. I wanted to buy more. Guess I should have had a buy order in place at those prices...

currently $976 @ https://btc-e.com/exchange/btc_usd

Well, this was predictable. https://news.ycombinator.com/item?id=6818821

Edit: Having read the (Google translation of the) PBOC's Notice, it looks like concern over money laundering contributed to the decision to issue this notice. There's a fairly comprehensive ban on financial institutions doing any kind of Bitcoin-denominated business. It also appears that Bitcoin exchanges must register with the telecommunications regulatory agencies and comply with anti-money laundering provisions (i.e. similar to the approach FinCEN took in the US).

Predictable?

> the price would plunge.

9 hours later... the prices have stabilized after dropping $100. We can add that to the hundredth time people have predicted the death of Bitcoin.

The PBOC notice (in Chinese):

http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2013/201312...

So, in short, they are still allowed to trade with it and use it, as long as they are 'okay' with the 'risk'. It's only financial institutions that can't work with Bitcoin anymore? Is this right?

Yes. I read the full text and it said that websites are people can have and trade bitoins at their own risk. Financial institutions cannot join this market due to the non-currency property.

I doubt any financial institutions were using it to begin with so this is a non issue for the moment.

Difficult to understand at this point what this decision really means. Are bitcoins still able to be traded as a commodity but not currency?

What does "The public is free to participate in Internet transactions provided they take on the risk themselves, it said" even mean?

Are they saying people deciding to exchange goods and services for bitcoin is ok, but not exchanging it directly into currency?

If anyone has actual insight or knowledge here it would be greatly appreciated.

A guess, but I imagine that chinese bank deposits are insured by the central bank, and that The gov't doesn't want to deal with bitcoins losing a bunch of value from one day to the next.

it might mean that currently operating exchanges need licenses, need to confirm IDs, or even get shut down. Shrug. Wild West.

I read it as the opposite, that trading websites effectively cannot be licensed.

This keeps the inherent risk with the buyers.

Reading the original announcement (http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2013/201312...), three things seems clear: 1) People may buy Bitcoins if they like. 2) People may sell Bitcoins if they like. 3) Banks may not sell Bitcoins as they are not 货币 (money). 4) Products offered for sale may not be priced in Bitcoin, as it is not 货币。

As far as I'm aware, no large ecommerce sites in China display prices in anything other than CNY, and none accept anything other than CNY (cash, bank transfers, bank-issued payment cards, CNY-denominated vouchers).

If I could pay for things online using Bitcoin, maybe I (and others in China) would start keeping some Bitcoin in an online wallet, in the same way we currently keep some money in 支付宝 (Alipay). From there, it would be easy to slide into mass speculation, which seems to be what the government doesn't want.

BTCChina reaction: http://i.imgur.com/cNuESY7.png

bounced back pretty quickly: http://bitcoinity.org/markets/btcchina/CNY

Apparently not... not yet at least, still going down :p

So it went down from 6979 to 6200.01 quite quickly. That's about 11%, not the utter plummet that ignoring the scale on your picture would suggest.

If an actual currency was devauled 11% from a news article...

What do you think would happen to the XAU/CNY rate if China announced that gold was no longer accepted in banks?

... which is why they wouldn't do that, because it would be catastrophic.

so in other words, XBT behaved exactly as you expected XAU would in the same situation, yet somehow to you that reflects badly on XBT but not on XAU.

No my point is that the Chinese government can control things so that this never happens. BTC cannot.

My read of this is that businesses are not allowed to price their goods in bitcoin which is a huge hit; beyond this nothing seems terribly surprising.

> "Notice" requirement, at this stage, financial institutions and payment institutions are not allowed to Bitcoin price for the product or service,

edit: from: http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2013/201312...

I'm confused about what constitutes a payment institution. Does this mean that credit card processors cannot price in bitcoin ? Or does this mean that Starbucks cannot price in bitcoin ?

There seems to be a distinction between a business and a payment institution. Or maybe what's said here is that a bitcoin transaction is like a 'coupon code' and not governed under the same rules that paying with money would be.

I read the full text. They said that "Bitcoin is not currency. It is a tradable virtual good. You can buy and sell it, but financial institutions cannot work with BTC."

Here is a human-made translation of the actual notice: http://www.reddit.com/r/Bitcoin/comments/1s5hzl/my_human_tra...

Seems far less dramatic than would justify the price correction we are seeing...

I personally think this is bad news for Bitcoin as it limits it to a speculator tool. With price growing constantly, it's not a good tool for e-commerce either - price in BTC needs to have 20-30%, plus, who'd spend their BTC and not their fiat if fiat stays the same and BTC keeps growing? I think BTC will drop under $1,000 and will stay there for a bit until some "real" positive news come in. Currently at the moment there's a pump-and-dump process going on as not everybody was able to sell yesterday. I'd say, ether buy below $900 or above $1,300 as for days BTC was trying to break $1,200 without success. I don't think there's positive enough news for it to break it today or tomorrow. Volumes of trading dropped significantly above the $1,100 levels, so, that's a good sign of Bitcoin running out of steam.

Its a good thing more and more states acknowledge the existence of BTC and its clones.

Its not some spooky internet stuff its on the radar of the biggest financial regulators on this planet. Not bad for something created 2009 and only really took off 1-2 years ago.

But BTC is still in its infancy.

Don't think strict currency activity was affected by this, but one of the main reasons this is important is that it's really really difficult to convert large amounts of RMB into any other currency. BTC provides an alternative to going through the banking system which I suspect drives some of its popularity in China. A lot of light is made about the problems BTC poses for the dollar - it's much more of a threat to anywhere that currency is controlled, because it's a straight bypass. The volatility is obviously a stumbling block but when you have no other alternative, it's pretty attractive.

Am I wrong to read the Chinese comments as essentially "We can't manipulate, control, or interfere with Bitcoin, therefore it is bad?"

That sounds like basically the entire argument in favor of BTC to me.

There's a lot of money sitting on the sidelines waiting for an entry point. The question is how low will the price go before it all starts piling in.

Also a lot of people who think its too high and were waiting for a sign it was time to take their profits and get out.

Well, either way, the next few hours should be interesting as the east coast wakes up and sees the headlines. Will they panic sell and push the price down further? Or will they notice that selloff at BTC-China exchange is over and see it as buying signal?

I tried logged into coinbase to sell my bitcoins after hearing the news and seeing the price dropping on btcchina. While I was doing this, coinbase's security sms messager took forever to come in, and because I sent in a request too many times coinbase blocked me out and said to try logging in again in 24 hours...

oh well, the price for the most part is recovered after the bump (here and in China) -- so I'm luck in some sense, BUT ... It's nice to know that if I ever needed to sell my btc in a jiffy coinbase will try to screw me...

It's boring to see all these "news" and some trying to manipulate the mass' sentiment. Cba really.

Down to 860 on coinbase.

Back beyond 1000 now

Bitcoin threatens the dollar system. China bought a lot of US debt in dollar. China has to keep dollar strong to get its money back, anything that could affect US Dollar is a no-no to China.

does this simple logic make sense...

The beginning of a great sell off?)

Or the beginning of another soar.

And the Bitcoin drops...

But will rise again :)

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