China gives Bitcoin a headache and rules it as a non-currency virtual product

China has taken a tough line against Bitcoin with the Chinese government ruling Bitcoin to be a virtual product earlier today and not a currency whilst barring Chinese financial institutions from doing any kind of business in it.

Latest Bitcoin Price
After the announcement the value of Bitcoin on BTCChina plunged 10 percent from nearly Rmb7000 per unit to Rmb6300 within an hour of the Chinese government notice. About a third of global Bitcoin transactions have been taking place in China and BTCChina became the world’s biggest bitcoin exchange by trading volume last month.

In US money, Bitcoin prices fell from a high of $1240 to a low of $870 this morning. This is according to data from Bitcoin exchange Mt. Gox. That’s a whopping 30 percent loss.

Money Laundering Risks
The Chinese central bank said in a statement on its website that it will act to prevent money laundering risks from bitcoin, a prominent digital currency that is not backed by a government or central bank. It said however that ordinary individuals were free to use bitcoin, so long as they took on the risk themselves.

“The concern is that it interferes with normal monetary policy operation,” said Hao Hong, head of China research at Bocom International Holdings Co. in Hong Kong. “It represents an unofficial leakage to the current monetary system and trades globally. It is difficult to regulate and could be used for money laundering. I think the central bank is right to make this move.”

Bitcoin Bubble?
Bitcoin prices are unsustainably high and the virtual money isn’t currency, Greenspan said in a Bloomberg Television interview from Washington yesterday.

“It’s a bubble. 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.” said the former Federal Reserve Chairman Alan Greenspan on Bloomberg yesterday.

Currently there are about 12 million Bitcoins in circulation, according to Bitcoincharts, a website that tracks activity across various exchanges. Bitcoin was introduced in 2008 by a programmer or group of programmers going under the name of Satoshi Nakamoto.

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China gives Bitcoin a headache and rules it as a non-currency virtual product