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People's Bank of China bans Bitcoin over 'drugs and guns' trade fears

It's a virtual good, not a proper currency that we can control, sniff Chinese moneymen

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China has banned its banks from using Bitcoin after warning the cryptocurrency could be used to fund terrorism.

Financial institutions in the Middle Kingdom will no longer be able to use Bitcoin, although citizens are free to spend the digital funny money.

The People's Bank of China announced its decision in a statement countersigned by four other financial bodies. It said that Bitcoin was a "virtual good" rather than a currency.

“Although there are people calling it a ‘currency’, it is not issued by the monetary authority, it does not possess the attributes of a currency such as legal repayment and enforcement abilities,” the central bank said in its (Chinese-language) missive.

“Judged by its nature, Bitcoin is one particular kind of a virtual product. It does not have the legal status of a currency, and it cannot and moreover should not be allowed to circulate in the market as a currency.”

The price of one Bitcoin recently surged to more than $1,000, although it slumped to about $970 after the Chinese central bank announced its decision.

Chinese speculators have been driving up the price of the virtual money, but they may be forced to think again if the official attitude hardens any further.

The People's Bank went on to claim that Bitcoin was used by a number of dodgy characters already.

The bank added: "As Bitcoin transactions 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. There have been criminal activities using Bitcoins, such as trading of drugs and guns. Relevant cases are under investigation."

The statement also warned (well, the Google Translate version said) that Bitcoin was "not having sex with mandatory legal tender currency", although something may have been lost in translation there. ®

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