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China bars banks from Bitcoin transactions

Shanghai - China's government banned financial institutions from trading in Bitcoin on Thursday, in what analysts said was a restrained first step towards regulating the digital currency that has exploded in popularity in China and soared in value in recent months.

A statement by the central bank and four other agencies said that, while the computer-generated currency did not yet pose a threat to China's financial system, it carried risks,but it did not curtail the use of Bitcoin by individuals.

"I think it's measured and it's positive," said Zennon Kapron of the financial consultancy Kapronasia.

"It does add legitimacy to the idea that it could be a nationwide accepted currency."

The value of Bitcoins on Chinese exchanges fell after the announcement, however, with one expert predicting the price could halve in the short-term. Digital currencies are generally highly volatile.

Bitcoins have seen their value relative to the dollar skyrocket about 800% in the past two months as speculators piled into the currency, according to bitcoinity.org.

While there is no official data available, Bitcoin market operators say Chinese nationals are major participants in the market and hold a huge share of the total number of Bitcoins in circulation.

Shanghai-based BTC China has recently become the world's largest Bitcoin exchange by volume.




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