The Chinese government has banned third-party payment services from clearing transactions on behalf of Bitcoin exchanges, effectively preventing people from using them for buying and selling the cryptocurrency.
The news was first reported by Coindesk and then confirmed by several other outlets. The ruling will come in to force following Chinese new year at the end of January 2014.
This is difficult news for Bitcoin. It was a rush of Chinese savers ploughing money into the cryptocurrency that helped to fuel the rapid increase in value from R120 this time last year to over R12 000 by the start of December 2013. Now, the price has dived twice on news from China that these savers are going to have to pull out – first almost 50% of its value was lost when the government rejected Bitcoin as legal tender, and after a nascent recovery it dropped back down to $678 (R6 978) briefly today and is currently trading at around R8 000.
That could be taken in two ways. Either its a sign that Bitcoin is surprisingly stable in the face of such a traumatic blow to one of its primary user bases, or that its big fluctuations are indeed indicative of a bubble which could fully burst any minute.
Either way, the people winning with Bitcoin at the moment aren’t necessarily those who plan to use it as an actual currency, but the day traders and commodity speculators who can take advantage of rapid changes in value and, indeed, hedge against them. Friend of htxt.africa Haroun Kola runs classes in day trading Bitcoins, if you’re interested.
China itself has fierce currency controls safeguarding the yuan, and has also seen several Bitcoin fraudsters making off with multi-million dollar heists of the digital cash. It’s believed that the government will also be enforcing the same rules against other ‘coins, such as Litecoin.