China central bank People’s Bank, Chinese Ministry of Industry and Information Technology and another three authorities in finance issued today a notice on Bitcoin, cautioning financial institutions and payments services against risks. It made clear that financial institutions are not allowed to,
- price physical goods or services in Bitcoin.
- accept Bitcoin as a currency, offer financial services for it, or invest in it.
- Insurance companies are not allowed to cover Bitcoin-related problems.
As for the websites that process Bitcoin exchanges, they are required to register with authorities overseeing the telecom industry and need to follow the anti-money-laundering law, requesting users to provide valid identification certificates and reporting suspicious transactions.
People’s Bank also held a press conference today on Bitcoin, saying Bitcoin is certain virtual good but not legal tender. The public are free to participate in Bitcoin transactions, at their own risk, as it’s an online good. It cannot and shouldn’t be used as a currency.
Given Chinese financial institutions haven’t directly taken part in Bitcoin exchanges or investments and the total amount of Bitcoins isn’t big, Bitcoin isn’t capable of having material impact on China’s financial system, China’s central banker added.
In recent months, Chinese became the group that pay the highest prices for Bitcoins. Although some businesses in China accept Bitcoins for payments, it is believed most participants are speculators who bet that the price will keep rising. Litecoin, another crypto-currency, has caught Chinese’s attention too.